The Opening Bell

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Knowledge Work: Finding and Funding a College Education

by Forrest Bell, CFP®, Sr. Investment Advisor, Financial Planner

November 2016

For more than a decade now, the US economy has shifted away from manufacturing and toward what the late business guru Peter Drucker called “knowledge work,” work that requires a person to use judgment and understanding to creatively solve problems. Over time, we’ve learned more about the challenges of this kind of work. Knowledge work expert and author David Allen puts it this way: “In the old days, work was self-evident. Fields were to be plowed, machines to be tooled, boxes packed, cows milked, crates moved. You knew what work had to be done — you could see it.” He goes on, “Now, for many of us, there are no edges to most of our projects. You can’t ‘see them.’” In knowledge work, you have to determine for yourself what you need to do to succeed at a project and when you’ve actually finished it.

Preparing for a Career in Knowledge Work

Preparing for a career in knowledge work is time consuming. In general, it means spending more time learning and more time in school than you need for other kinds of work. Perhaps that’s why the national consensus is that attending college is essential to a modern career. In his article “College Calculus,” John Cassidy writes that in 1980, only one in six Americans ages 25 and older was a college graduate. Currently, about 70 percent of high school graduates go on to college, and half of all Americans between the ages of 25 and 34 have a college degree. Fortunately, there are plenty of colleges to meet this demand. Unfortunately, they have become expensive. Here is a list of California schools with their total annual costs:

Stanford University $61,261
Santa Clara University $60,489
University of California, Berkeley $54,801
California State University, Sacramento $32,986
Source: MoneyGuidePro

Choosing a College

The sheer number of colleges and their costs have made choosing a college more stressful and more complicated than ever. To unwind this complexity, many families turn to high school guidance counselors and/or private college admissions consultants. Private college admissions consultants offer a range of services from test preparation and college selection to essay and interview coaching and application packaging. Some even offer services for students who are just beginning high school, providing curriculum planning to help students choose the right classes. There are a few things to consider when searching for a college admissions counselor, but finding a good one can make the college application process more organized and less stressful for parents and students.

Paying for College

However, even gifted college admissions consultants fall short in their handling of one particularly crucial component of choosing a college. Because their work focuses on helping students target the right school and shepherding them through the application process to improve their odds of being admitted, the consultants often give little attention to how families will pay for college. For financial planners, on the other hand, how to pay for college has become a meaningful concern.

Gone are the days when most families could say to their children, “Get into the best school you can, and we will make sure it gets paid for.” We see that even our clients who had the discipline to fund 529 plans from the day their kids were born still sometimes have to find other resources to cover the costs. If those other resources are the parents’ savings accounts or income that was earmarked for savings, then funding college can create a hole in their retirement plan. If those other resources are student loans, then students can end up with an unwieldy amount of debt. As the August 2016 issue of Consumer Reports points out in the article “Lives on Hold,” many recent college graduates are using all of their earned income just to pay for groceries, housing expenses, and student loan debt.

Using Planners/Consultants

This is why the combined work of financial planners and college financial aid consultants, who can advise you on how to reduce college costs, is becoming so important to the college planning process. A good financial plan can determine how much is too much to commit to funding college before the damage is done. Additionally, a good college financial aid consultant can reduce the cost of college itself.

The work of reducing the cost of college starts by determining whether a family will be eligible for needs-based financial aid. If you’re eligible, you should give particular focus to schools that are generous with needs-based aid. If needs-based aid is not an option, focus should turn to merit-based aid. Some schools are especially keen to recruit students with strong academic records and will reduce tuition to entice them. Finally, some colleges are interested in balancing each incoming class with nonacademic accomplishments and talents. If your child has a special talent, it’s worth finding schools with an historical interest in that talent as it may mean substantially reduced tuition payments.

Like a lot of knowledge work, college planning is not exactly self-evident. You can’t easily “see it,” which might be the reason why many of us overlook finances when planning for college. Fortunately, it’s easier than ever to bring these financial considerations to the fore, and it is highly worthwhile to do so.

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