Q. I have children who will soon be starting high school. What do I need to know about financial planning for college?
A. There are a few key pieces of information emergency physicians need to know regarding paying for the college education of their children. The first is that by virtue of their high income, their family situation is likely to differ significantly from that of the average student. Average students and parents will fill out a Free Application for Federal Student Aid (FAFSA) or the similar College Scholarship Service (CSS) application and discover a difference between the parents’ expected financial contribution (EFC) and the cost of attendance at their chosen school. That is not the case for the typical children of emergency physicians. What this means is that your children will not receive any need-based grants or scholarships, nor will they be able to take out federal and state student loans, at least as undergraduates, unless they are able to be considered independent from you (marriage, military service, or children). The children of many physicians will have to pay for school in a different manner than their parents did! It is still worth filling out the FAFSA just in case, especially if you will have multiple children attending expensive schools at the same time, but don’t expect much. In addition, some schools require the FAFSA be filled out in order to receive merit-based scholarships.
Financial-aid planning is the process whereby some middle-class families may benefit from making the difference between the EFC and the college’s cost of attendance as large as possible. This requires an understanding of what counts on the FAFSA (or CSS) and what doesn’t. Then you transfer your assets from those categories that count (taxable investing accounts, savings accounts, 529s) to assets that do not (paying off debt, retirement accounts, life insurance). The theory is that this will allow students to get need-based grants and scholarships as well as to be eligible for loans. Most physicians will not benefit much from this process due to their high income. They will be much better off spending their time, effort, and money increasing their savings to help pay for college.
There are four pillars to successfully paying for children’s education. Every situation is different, and it is likely that one or two of these pillars will be more important in your scenario than the others, but the larger the contribution from each of them, the easier the task will be.
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3 Responses to “Financial-Aid Planning for Physicians with College-Bound Children”
December 12, 2016
David Adinaro MD, FACEPI thought this was very well written but as the parent of a recent college student I was surprised by some of the conclusions in the last paragraph.
My daughter looked at a variety of schools but none were anywhere near $36,000 per year. The average was closer to $50,000 per year. (with a scholarship we are paying $40,000 in her Freshman year)
Also in this economy who expects their child to earn nearly $10,000 a year and to put it towards their education? At minimum wage that is nearly 1,200 hours of employment in a year.
Assuming you do not want your child to carry any debt it is realistic to plan for at least $120,000-$150,000 per child for average private colleges (and many public ones).That is assuming they graduate in 4 years (rare these days) and don’t have internships and semesters abroad.
December 12, 2016
James M. Dahle, MD, FACEPThank you for your valuable and personalized feedback.
Would it be helpful for me to provide a list of schools with tuition under $20K a year? There are dozens and dozens of them. There are 10 in my small state alone. Just because your daughter only looked at more expensive schools, doesn’t mean the cheaper ones do not exist. If your daughter were told that schools costing $40-50K per year would not be an option, I’m sure she would pick her favorites of the less expensive ones to apply to. Some states don’t have very cheap in-state universities, but I don’t know of one where the cheapest school in state is >$40K.
I, for one, expect my children to earn $10,000 a year during college. Heck, my wife and I both made more than that a year 20 years ago in college with summer and part-time work. I did so while maintaining a GPA sufficient to get into med school and playing college hockey. Hopefully they can get jobs that pay more than minimum wage, but even if it takes 1200 hours, I don’t see that as a big deal. Consider 4 months in the summer- maybe 18 weeks. At 60 hours a week, that’s 1080 hours. That only leaves another 120 hours, or 15 per month during the school year. Seems very doable to me. But if it seems like too much for you, knock it down to $5,000 per year and adjust elsewhere accordingly.
I’m not sure what you mean by “this economy” but by most figures (unemployment, wages etc) the economy is doing at least average by historical figures.
Finally, I see nothing wrong with you paying $150,000 per child for your childrens’ educations as long as you can afford that. I know a rheumatologist who spent a cool million on the education of his four children because it was a major priority for him. But if you (or someone else reading this comment) cannot afford that, I would recommend some of the tactics discussed in the above article.
February 27, 2017
HDMDDisclaimer: I am an avid fan of the ‘White Coat Investor’ blog.
I agree with the pillars in the article. My first son is a freshman in college at North Carolina State University which is a very good public university and I am paying under $25000/year. While he did apply to some elite colleges, I let him know way ahead of time that unless he had really big scholarships he would be going instate and he understood. I won’t make him work while at college until he feels like he has his academics under solid control.I have two others to put through college in a few years. I don’t plan to touch the 529 right now and I will just transfer beneficiaries if I have to. This is my first year of at least 10 years of college payments total for my three children, and, while prestige is nice, I plan to pay for value. Here in North Carolina, that’s pretty easy to do.