Five Steps to an A+ College Plan

darts There’s one key chapter missing from What to Expect When You’re Expecting, and it plays to the tune of over $100,000: the cost of your child’s college tuition. Regardless of whether your child is two or twelve, it can be all too easy to put saving for college on the back burner. But one thing in life is certain; it moves quickly. Don’t get caught unaware and unprepared for college. Your child’s education is one of the most important investments you can make, and with today’s costs, it pays to plan ahead.

Have you started saving for your child’s future education costs? If you haven’t, it’s time to consider these five steps.

Step 1: Know What to Expect

College tuition gets more expensive every year. Tuition rates have increased at a faster pace than many other items over the past decade and it doesn’t look like they will slow down anytime soon. Over the past ten years, college costs have risen an average of 2.4% a year for private schools and 3.5% for public colleges.


If this upward trend continues, in 25 years it could cost $300,000 to obtain a four-year undergraduate degree. The costs will vary depending on the institution attended, room and board, and other educational expenses, but either way, that’s a large sum for four years of school. For a 2018 graduate, the average student loan balance was over $29,800[2] and the average monthly student loan payment is $393.[3] That is a large burden for someone just beginning their career, but it can be prevented with good planning.

Step 2: Start Saving

It’s never too late or too early to start saving for your child’s college fund. By starting early, you can reap the rewards of compound interest. Even if you are starting late, think in relative terms: today’s late start is still an early opportunity in the eyes of your future-self, looking back.

Even if you don’t think you have enough room in your budget to add another line item, $50 a month is still $50 more than $0. Setting up automatic contributions is a good way to remind yourself that college is getting closer and your monthly account statement will keep this goal in the forefront of your mind.

Step 3: Decide How You’ll Save for College

The most common method people use to save for college is through a 529 plan. A 529 plan is a state-sponsored education savings account that allows earnings to grow tax-free. This means that 100% of your growth can be used toward the tuition and is not whittled away paying annual taxes, which can have a big impact on bottom line.

There are two categories of 529 plans: prepaid tuition plans and college savings plans.

Prepaid plans let you pay future tuition costs at today’s prices, which, considering skyrocketing college costs, can be enticing. However, prepaid plans are more limiting because funds can only be used for in-state schools.

College Savings 529 plans, on the other hand, can be used to pay for college in any state (and thanks to new rules in the 2017 tax reform, 529s can now be used for private elementary schools, up to $10,000 in distributions per student each year). As an added benefit, some states (including Illinois) give you a state tax credit for using their plan.

Section 529 Plans are sponsored and administered by states, meaning that you may have less flexibility and choice regarding investment options, depending on the program.  However, you are not required to use the plan offered by the state that you live in, so you are free to shop around. Visit to understand your state’s policies.

Beyond 529 plans, some families use Roth IRAs to save for college. Your Roth contributions can be withdrawn at any time and can be used for any purpose. In addition, Roth IRAs can help you avoid the high fees that some 529 plans charge and they also offer virtually unlimited investment options. IRAs will also not have any impact on your financial aid eligibility.

For college savings, Roth IRAs aren’t the perfect option, as their primary goal is to fund your retirement (consider that while student loans are always a possibility, there is no such thing as a retirement loan). But Roth IRAs do offer an alternative (or supplement) to the traditional 529 plans. Think about opening a 529 plan for college, but also continuing to contribute to a Roth for retirement. This strategy gives you extra resources to draw on if you need them.

Step 4: Break the Cost of College into Thirds

While some people can save and pay for the total cost of their child’s college education, most parents don’t fit into this category. Instead of letting that fact get you down, break the cost of college into thirds.

The first part is to save before your children head off to college. By starting early and having some help from the markets, you can accumulate a solid base to use for tuition as well as room and board. The next step is to plan on paying for about one-third of the costs while your child is in college. This can be through a combination of scholarships, grants, a part-time job for your child or contributions from the family. The final piece is student loans that your child or you can repay after they have completed their education. Since the goal is to minimize student loans, try to maximize the first two parts of this three-pronged strategy first.

Step 5: Stay on Top of Things

Just like your 401(k) plan, you need to monitor your college planning investments. While in the early days of saving for college you will want to be more aggressive with your investments. As college draws closer, the investment allocation should become more conservative, just like a retirement account. It is also helpful to monitor your balances, keep an eye on the changing college costs, and track your progress towards your goal.

Jumpstart Your College Planning

Let us help you prepare for the future. With our guidance and expertise, you can start saving for your child’s future today so you can ease the worries of tomorrow. To get started, you can reach us by calling (844) 377-4963 or emailing You can also book an appointment online here.




Perritt Capital Management, Inc. is the Registered Investment Advisor for Windgate Wealth Management accounts.  Neither Perritt Capital Management or Windgate Management provides tax advice. Consult your professional tax advisor for questions concerning your personal tax or financial situation.

Perritt Capital Management and Windgate Wealth are not responsible for, and expressly disclaims all liability for, reliance on any information contained in these third-party sites.  No guarantee that information provided in these sites is correct, complete, and up-to-date.

Information here is obtained from what are considered reliable sources, however, its accuracy, completeness, or reliability cannot be guaranteed.

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