What's a good way to plan for college financing?

Hey everyone, my parents have been talking a lot about making college savings their most important savings goal. They're really freaking out about it. Do they have to put everything else on hold just for me to go to college? Is there a certain amount they should aim for or some resources I can share with them so they don't stress out as much?

Hi, firstly, kudos to your parents for prioritizing your education. However, it's important that they don't neglect their other financial responsibilities in pursuit of this goal. Here are some key points to consider:

1. Starting Early: Saving for college often begins from the time a child is young, letting the interest compound over time. However, it's never too late to start, and every little bit can help.

2. Using the Right Accounts: 529 College Saving Plans or Education Savings Accounts (ESA) are smart options. They allow parents to contribute money that will be invested and grown tax-free, as long as the funds are used for qualifying education expenses. This includes tuition, room & board, and textbooks among other things.

3. Setting Reasonable Goals: The amount to save hugely depends on the type of institution you aim to attend (community college, public university, private university) and whether you plan to stay in-state or go out-of-state. The College Board provides an estimate of the average cost of a year at various types of colleges. You can use that as a guide.

4. Exploring Additional Funding Options: Scholarships, grants and work-study programs are all ways to supplement your college fund. And when the time comes, filling out the FAFSA (Free Application for Federal Student Aid) can open the door to federal student aid, which can significantly reduce out-of-pocket expenses.

5. Understanding the ROI: If attending a certain institution would lead to crippling debt but isn't likely to result in a high enough income to pay off that debt, it may not be the best choice. An education should ideally be a financial investment that pays for itself over time through increased earning potential.

6. Community College Transfer Pathway: If the financial burden is still too high, many students successfully start at a community college and then transfer to a 4-year institution. This can save a significant amount of money and still result in the same degree.

Remember, while your college education is a significant investment, it's important that your parents also continue to save for their retirement and maintain an emergency fund. It is often more cost-effective to borrow for college than it is to borrow for retirement. It's all a matter of finding the right balance between saving for college and other important financial goals.