Carolyn's StoryWhen Carolyn's son, Joey, was 2, his grandparents announced they were setting aside money for his education. She and her husband, Joe, didn't know how much, but the money had time to grow, so they were optimistic. "We hoped it might even cover Joey's two younger sisters," she says. Photo by Shutterstock.
Flash forward 16 years, when they got the check…for almost $21,000. "We were so grateful," she says, but that amount worked out to only $6,900 for each child. Joe's construction business was hard-hit in recent years, so they'd only saved a few thousand. Meanwhile, Joey had been accepted at his dream school, a private college that would cost about $41,000 a year.
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HOW THIS HAPPENED
I completely understand why the Thurmonds didn't ask what dollar figure to expect when Joey's grandparents first made their offer: Money is an awkward topic, period-never mind when you're receiving a large gift. "You're so thankful," says Carolyn, "but you're afraid of looking greedy if you ask about the details." In many families, there are emotional strings attached to gifts and loans, or you may be ashamed that you need help, even if your relative is happy to chip in.
The best way to push through the discomfort around discussing money is to focus on the practicalities. Say something like, "We really appreciate your help. Could we discuss the amount you're considering so we can map out our plans?" Even a short chat would have prepped the Thurmonds, and then they could have managed their expectations.
Making It Work Here's what I advised Carolyn to do and how you might want to handle a similar situation:
√ Know your numbers No matter what you're paying for, you need to figure out how much college will cost, instead of having a vague idea. Putting three kids through public college means four years at roughly $16,000 annually per child, including room and board, or about $64,000 total for each kid. I love the ice-water shock of doing the math: It gets you moving. Once Carolyn knew what she had to deal with, she socked away $6,900 in three 529 plans. Then she worked on other solutions.
√ Get creative In addition to loans, grants and work-study, students can attend a nearby school (saving on room and board), or go to a (cheaper) community college for a year, then transfer. That's what Joey did: With his first choice topping $40,000 annually (tuition, room, board), it turns out he'll only have to attend for roughly two years since he took classes at a community college during high school and in the year after graduation. Carolyn also figured out that he could live at home, lowering the cost to $31,000.
Speak Up At first, the school offered a package including $8,500 in loans and $9,295 in grants, but I urged Carolyn to press for more. As in most negotiations, the first offer is often low. In Joey's case, the college increased their grant to $15,295 per year-a huge win for asking a simple question. (The Thurmonds don't want Joey to work during the school year, so he can focus on academics.)
√ Speak up again! Carolyn thought there was a slim chance that one of Joey's other relatives might pitch in, but she felt awkward asking. I reminded her that asking never hurts. Happily, once she outlined their dilemma, "to my shock, the relative offered to contribute $10,000 this year!"
Suddenly the Thurmonds were within $5,700 of their goal, which they had in savings. They also began exploring loan options in case they need to borrow in the future-although it's something they hope to avoid.
the takeaway Few people have an easy time paying for college, even with careful planning, but there are often creative ways to piece it together.
Financial Expert MP DUNLEAVEY, WD's personal finance columnist, is the author of Money Can Buy Happiness.