Saving early for college tuition

Wary families face the challenge of daunting costs for kids' higher education

By Erin Middlewood, Columbian special projects reporter

Published:

 
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Beth Cooper helped her 9-year-old son, Jace, open his own bank account, where he stashes half his $4-a-week allowance. He was thrilled when the balance reached $100.

"Mom," he said, "surely I can pay for college now."

If only.

The price of tuition, even at state schools, has been rising faster than middle-class families' earnings. According to a recent report by the student loan company Sallie Mae, families draw on grants, scholarships, paychecks and savings, but still end up borrowing heavily for college. The price tag is so daunting that half of families don't save for their children's college at all.

Who can blame them? They're wary of the stock market after the 2007 financial crash, but interest rates on CDs and savings accounts are almost nil. And even the investment that was supposed to be a sure thing — Washington's Guaranteed Education Tuition plan — gets called into question every legislative session.

"For us, bills have to get paid first," said Ridgefield resident Rebecca Stapper, mother of two. "It's very difficult to save for college when you're lucky if you get 1 percent in a savings account."

Tuition at state universities, on the other hand, has risen between 6.6 percent and 19 percent a year over the past decade, according to the state actuary. Attending the University of Washington will cost an estimated $27,587 next academic year, a figure that includes tuition, fees, room and board, and all associated expenses.

How can families save enough to cover a bill like that?

"Investing in the stock market is risky because over 17 or 18 years, it's probably going to do better than you could do most other places, but it's not guaranteed. The market may go up until the kid is 15 and then collapse in two years," said Lewis Mandell, a retired University of Washington finance professor. "A GET plan is very good for parents because it hedges your cost. You don't really care what the cost is when your kid goes. You can kind of forget about it. It's the safest bet."

No guarantees?

At least it seemed like it. Washington is one of a half-dozen states that offer a pre-payment plan that aims to make college more accessible, but some legislators have floated the idea of dissolving the GET program for fear it can't stay solvent as tuition continues to rise. A report from the state's actuary states that the GET program was 79 percent funded as of June 30, 2012, but that figure can fluctuate year to year and doesn't necessarily mean the program is at risk. Long term, 110 percent funding would be ideal, according to the actuary's report. One GET unit costs $172 until new, as-yet-undetermined prices take effect July 2. It takes 100 credits or $17,200 to cover one year of tuition and fees at the most expensive state school.

With the history of rising tuition prices, GET remains an excellent way for families to save, said Betty Lochner, who directs the state's program.

"Worrying about a long-term liability is something (legislators) are probably always going to revisit, and they should. It's part of our checks and balances. Every year it comes up. We're trying to help families understand that nothing has changed," Lochner said. "You are buying the future guarantee: That if you have a 3-year-old and the stock market crashes when she's 18, your child can still go to college. People who are sophisticated investors and think they can do better, that's great. Go do that. That's not what this program is about."

Cooper and her husband are placing their bet on the state's GET program. The accounts for each of the Coopers' two children are among 3,748 opened by Clark County residents, and 147,054 statewide, since the program opened in 1998. Each month, the Coopers pay a total of $350 toward a year of college for each child. That's on top of the $450 they pay for their own college loans. It's a stretch for the one-income family. Thomas Cooper works in the purchasing department of a metal casting company.

"I want to find a balance," said Beth Cooper, 29. "We had to pay for our school. That's why we'll be in debt until we're 40. I'd love to have my kids go to school without tons of debt."

The Stappers' eldest child is a senior at Ridgefield High School. Even with two earners — Rebecca is a dental assistant and her husband owns a finished wood repair business — they have little hope of covering tuition at a public university.

"We looked into Washington State (University) in Pullman. That's $24,000 and change for one year — close to $100,000 for a four-year degree. That's a lot of money for a state school," Stapper said. She and her husband will instead help their son cover tuition and fees at Clark College, which is about $4,000 an academic year for a full course load. Just 10 years ago, a year's tuition at Clark was about half that.

Council looks at cost

Addressing affordability is a top priority of the nine-member Washington Student Achievement Council. Brian Baird, a former congressman representing Southwest Washington, led the group until his recent ouster by Gov. Jay Inslee, who has yet to replace him.

"Tuition costs have gone up. At the same time, enrollments have gone up. But the overall level of funding has not been able to keep pace," Baird said. "Students are paying a higher percentage of the cost in the form of tuition than they have for many years, with a corresponding increase in debt. The challenges are going to be to reduce the growing costs of tuition, to increase availability of resources for students to afford the tuition that there is, and reduce the debt burden — all of those when we have a tight fiscal situation at the state and local level."

The Washington Student Achievement Council plans to make recommendations by the end of the year.

Some believe the price of tuition may level off on its own.

"Loans have gotten very big, and the job market very soft. People may not be willing to run up $50,000 to $100,000 in loans in order to get an education," said Mandell, the former UW professor. "The upward pressure on college costs is probably going to diminish. There's a limit to what students can pay. Costs may increase less rapidly than inflation."

Perhaps, but Beth Cooper isn't counting on it.

"It's my hope and my faith in humanity and our society that we'll create some legislation here in the future to help with higher education and keep the cost down," Cooper said. "At this rate, I don't how we could possibly afford it. I'm afraid it will be so astronomical. That's why we have to do something now."