When parents ask for advice on saving for college, the first thing we always tell them is don’t depend on a scholarship. To truly put the odds of a scholarship in perspective, consider that only 19% of high school students with a GPA of 3.5-4.0 get any kind of academic scholarship and it is usually a small part of tuition. Only .3% receive a full ride scholarship according to the National Postsecondary Student Aid Study. According to the NCAA, less than 2% of students receive an athletic scholarship. The reality is that college is expensive, scholarships are rare, and you need to plan and save.
Now imagine that you don’t just have to save for one child, but you have to save for three daughters that will be in college at the same time. Let me tell you the story of a couple with twin girls and a younger sister that we helped plan for college expenses. This couple wanted to provide their daughters with the ability to go to a four year university of their choice. So, we ran the numbers. We used conservative, but realistic numbers – planning for four years at a private, in-state university. At the time, the future value of tuition plus room and board ran over a hundred thousand dollars.
For any young couple, the need analysis portion of financial planning can be stressful. The fact that those numbers were tripled for their girls was even more overwhelming. Facing the shock of the total dollar amount they needed, this couple could have retreated into the myth that their kids could earn a scholarship. They could have waited to just “figure it out” like many parents do until it is too late. What happened was this smart and down-to-earth couple chose to take action.
Looking at their overall situation, we built them a comprehensive financial plan that included college for their children. They had a good income and plenty of time in their favor. We broke their plan down into manageable steps and got to work. We used the right investment vehicles, in their case 529 Plans, and implemented an appropriate allocation of funds. We made sure they contributed the right amount every month into each account and we watched their totals grow over the years as we reallocated or maintained their investments.
Time flew by and before we all knew it, the twins were Seniors and their younger sister was a Junior in high school. These girls were impressive enough that everyone thought if there was someone who would get a scholarship, it would be them. One of the twins ended up being Valedictorian and the other twin was third in her class for academics. Their third daughter was in the top of her class as well. The twins had also excelled on the soccer field and were recognized as two of the top players in the state. Again, their parents could have listened to many of their peers in similar situations and relied on scholarships. They heard it from their fellow soccer parents who thought all the time and investment in gear, uniforms, coaching, workshops and the like were sure to bring scholarship money to pay for college.
Graduation day arrived and the twins had both applied to the same schools. Their top two picks included one out-of-state college and one in-state school. The following year, their youngest daughter graduated from high school with excellent academics and was looking at both in and out-of state universities. Their parents were so excited and proud to be able to tell them they could afford to go to either. The saving and planning had certainly paid off.
These three girls became an exception to the rule. The twins were offered partial scholarships to the out-of state school and a full ride scholarship to the in-state university. Both girls ended up taking the full ride scholarship and went on to obtain their degrees. The youngest daughter was able to secure academic scholarships to the school of her choice. That may sound like it is contradictory to the whole point of not depending on scholarships. You might think the parents who saved those funds felt they wasted their time or money. But that’s not the end of the story.
The truth is that even scholarships that are awarded are usually only for one year at a time. Attendance, injuries, grades, behavior, new player recruiting, and new coaches can all affect scholarships. Eventually, they did tap into their 529 funds to help with covering college costs beyond their scholarship amounts. The money they had saved allowed all of the girls to purchase things like computers, printers and other items that are necessary to be successful in college. They also had enough to apply toward graduate school, so they were able to continue their educations. This couple is so grateful that their daughters could focus on obtaining their degrees and didn’t have to feel the undue pressure of maintaining a scholarship.
To this day, they are thankful that they had a plan in place that worked. They still tell us about the struggles some of the other soccer parents went through when their kids did not get the athletic or academic scholarships they were expecting. This couple didn’t have to stress about the costs, they were able to enjoy the time they had with their daughters, and they ended up with money their daughters could apply to earning a Master’s degree.
Not every kid gets a scholarship. In fact, most don’t. The ones that do still have a lot of expenses. Even the fortunate .3% that receive a full ride scholarship can tell you the value of a good financial plan.