Be prepared for sharp increases in tuition at colleges across the country starting next year and for the trend to last for years!

The cost of higher education is one of the most significant costs that families face. Without a plan, Out Of Pocket Savings (OOPS) can be reduced faster than for any other expenditure and have a devastating affect on long-term financial vitality or even viability.

College Tuition set to increase

The American Council on Education, made up of university presidents, and The College Board, a non-profit association, are both warning of higher tuition costs in the future. Current reports show about 6 percent increases in recent years for both Private and Public colleges.

And current reported increases do NOT take into account the significant changes that the current economic downturn and credit crisis are causing! The impact on colleges will probably force them to increase tuition and pass on other costs to students and parents.

Family Net Worth

Family Net Worth is the total value of assets minus total of liabilities; that is, net worth for the whole family, including all family members. For most of family life, it is the same as the parent’s net worth because young children do not usually have any assets, or liabilities.

That starts to change as college gets closer because older children may have income, savings, and loans or debts. Certainly during and after college there can be a dramatically different outlook for Family Net Worth because of the significant costs of college tuition and other related costs.

Net worth is a good indicator of overall financial health. Family net worth can be an excellent indicator not only of a the ability for a family to financially handle significant events, such costs of higher education, but also of how healthy they will be after college.

College Funding Sources are Falling

There are several broad categories of external funds that families can use to pay for college. Each of these has a major factor that is already pushing the supply of those funds down or very likely will reduce the supply in the near future.

- Grants and Federal Aid: potentially lower due to economic pressure on state governments
- Loans: dramatically lower due to credit crisis
- Aid from Colleges: lower due to lower revenue
- Private Scholarships: lower due to down economy and lower business profits

College tuition keeps rising faster than inflation and therefore the need for external funds increases. Families need external funds more than ever to pay for increasing costs.

Increased Demand and Decreased Supply

So the Demand will likely be higher for these same funding sources and the Supply will likely be lower. The competition for grants, scholarships, and other forms of aid will increase among students and college bound families.

Families that develop a plan to pay for college, and implement it, fare significantly better than families that have no plan at all. The reason for this is simple - many aspects of college financial planning take time. Competing for financial aid and scholarship money takes time, preparation, and expertise.

Impact on Family Net Worth

The impact of the current trends in tuition costs and the underlying causes is additional strain on current and future costs, and more importantly, current and future Net Worth. More money may need to come from savings and other assets to pay for higher education as the other sources of funds become harder to get.

Inadequate planning and preparation usually means fewer external funding options, which means using internal funds.

- Savings
- Retirement
- Home Equity
- Extended Family Assets

These are all assets, the very things that make up Family Net Worth. Using these sources almost always means Reduced Family Net Worth, and that is directionally incorrect. It is family net worth that is the critical factor in long term financial health.

Plan for Success

One comforting piece of news is that political support for higher education is strong in both parties so the outlook is for financial aid from government sources to at least maintain and possibly grow.

The key is to be able to get your SHARE of the financial aid that is available. Plan to succeed, plan to start early, plan to get the help you need, plan to protect your Family Net Worth.

Include these items in your plan:
- Get educated about the process of financial aid
- Evaluation of all sources of funding
- Reallocate assets to maximize financial aid
- Understand which assets get counted in college evaluations
- Forecast Family Net Worth before, during, and after college costs
- Define parent and child financial roles that work for your family

As many as 80% of the families we work with don’t know how they are going to pay for college. The very fact that some families take the time to develop a plan is a key to their success in being able to pay for a college education and keep their head above water through the college years and after.

Families should evaluate their strategy to pay for college costs and ensure that they are well positioned to obtain available financial aid. Family Net Worth can be a valuable tool to help develop a plan and also to compare several different plans for shooting the financial rapids of college costs.

It may be even more important to recognize the financial challenges for family members after the college experience. The college graduate needs to be financially stable in order to start their independent life successfully. The parents must be financially healthy enough to make it to retirement and well beyond.

Michael Wilson is a Personal Financial Strategist with Smart Money For Life. He guides individuals to realize long-term financial health and growth. See programs and strategies to help meet your financial goals at Smart Money For Life. Visit his blog at Family Financial Values.

College tuition has been rising faster than inflation, but is now set to accelerate even more in the near future. And this trend could last for years due to the number of factors involved.

The cost of higher education is one of the most significant costs that families face. It is more important than ever for families to develop a plan for college expenses. While a plan does not ensure success, no plan at all could have a devastating affect on long-term family financial health.

College Tuition Set To Increase

The American Council on Education, comprised of more than 1,600 college and university presidents, are predicting sharply rising college tuition costs. The College Board, a non-profit association of educational institutions, released data showing costs rising 1 to 3 percent above inflation, with Private colleges jumping 5.9 percent and Public colleges up 6.4 percent.

And those numbers do NOT take into account the significant changes coming from the current economic downturn and credit crisis!

College Income Sources Being Squeezed

A college is a business, and in many ways operates like a large company, with several sources of income and various expenses. Several income streams are taking a hit all at once; revenues are going down.

Income Sources:
- Tuition
- Government funds (state, federal, etc.)
- Private Funds -alumni, fund raising, charitable donations, etc.
- Endowments - investments (from previous gifts and other revenue)
- Loans - banks, private, bonds, etc.

Expenses can be cut only so much, so one of the few remaining options is to raise prices. Prices translates to student tuition in the business of higher education.

Market Conditions Impact College Revenue

Everyone knows the stock market, and in fact nearly all markets, have been dropping. Values for stocks, mutual funds, even money market funds are losing up to 40% of their value.

The economy in general is either in a recession or headed for a recession depending on who is talking. This reality is a global issue which will likely mean that a down economy is going to be a reality for a longer time, probably measured in years.

The direct impact of the stock market drop is a direct loss of revenue. Endowments are investments in, among other things, stocks so the value of endowments held by colleges and universities has taken a beating. Lower value of these types of investments means they generate less revenue.

Another impact of the stock market drop is that businesses and individuals also lost a lot of value in their investments. Therefore, they are both less likely to donate to the colleges. Alumni and businesses are both significant sources of revenue for colleges.

Governments, especially state governments, are seeing lower tax revenue due to the falling economic activity. Therefore, they are cutting spending and some are already reducing current year funding for Public colleges. Virginia and Maryland both cut funding to state schools.

Credit Crisis Impacts Colleges

The Credit Crisis has dramatically, and rapidly, reduced the availability of loans across the entire US and global economy. Of course this has a direct impact on colleges and universities who, like businesses, routinely borrow to finance short term as well as long term funding needs. Loans are not just expensive, they are non-existent for many borrowers, colleges included.

The lack of available credit has impacted government loan programs and private loan programs. The effect is that both of these sources of loans to parents and student specifically for college are less able to lend for this purpose.

One more look at endowments is in order because colleges rely on this revenue for operating expenses; they typically utilize the earnings and not the principal, thereby ensuring long-term earnings from these investments.
The speed as well as the severity of the drop in market values coupled with the lack of available credit had a further effect of weakening college endowments.

They had no other source of funds and many schools are burning through the Principal of their endowments, just to stay afloat in the short-term. That means that endowment fund not only generate less income for college today, but will generate significantly less in the future, further exacerbating the revenue problem.

The outlook for college tuition costs is that they will increase at a faster rate in the near future than they have recently. Major economic factors are combining to push college costs up.

Families should evaluate their plan to pay for college costs and ensure that they are still well positioned to obtain available financial aid. The increases may be so severe that many families will need to adjust their strategy in order to manage rising costs of higher education.

Michael Wilson is a Personal Financial Strategist with Smart Money For Life. He guides individuals to realize long-term financial health and growth. See programs and strategies to help meet your financial goals at Smart Money For Life. Visit his blog at Family Financial Values.

Are your lesson plans disorganized? Do you need help keeping track of your child’s homework? This article is designed to provide you with some useful tips that will help you organize schoolwork no matter what side of the desk you’re on. Specifics may vary from person to person; however, the following information includes helpful and important guidelines from which everyone can benefit.

School days, school days… they’re here again. And we have some schoolwork organization tips for ensuring that your child’s organizing skills make the grade.

One thing you can always be certain about when your children begin a new school year is that the paperwork will build and build. To avoid the distressing notion of losing an important homework assignment, or misplacing vital notes needed for an upcoming test, or losing track of just about any other kind of school-related document, we offer the following schoolwork organization tips.

Schoolwork Organization Tip #1: Devote separate folders to individual subjects. Sometimes, students (and their parents) may think it’s best to stuff several subject assignments for example math and science into the same 2-pocket folder. Invariably, the papers will get mixed up, causing confusion. Instead, designate one folder for math and another for science… and title them clearly on the front. Colored folders also work best in this situation where you can use a different color for each subject for easy identification.

Schoolwork Organization Tip #2: Divide ring binders by subject. Much the same as pocket folders, ring binders can become confusing if they’re not organized the right way. Rather than just placing papers into the binder in any old order, insert a subject tab divider (or tabbed index) to divide the binder into sections that can be referenced quickly just by flipping to the respective tab. Also, add clear 3-hole-punched sheet protectors to your student’s ring binders, helping to protect important assignments while also better organizing them.

Schoolwork Organization Tip #3: Keep working papers apart from archive papers. Every student has longer-term projects, such as term papers, that are typically completed over several weeks or months. And of course, students also have homework on an ongoing basis. For enhanced organizing efficiency, do not mix these working project papers with documents that have already been completed…such as older homework assignments that have been graded and returned by the teacher. Older papers can be placed into their own archive folder for safekeeping.

Schoolwork Organization Tip #4: Stay away from the urge to overstuff folders. As the school year progresses, most students will cram as much paper as is humanly possible into each folder until the folder is literally overflowing. The result is usually a mess, where specific papers are difficult to find. If a pocket folder begins to get crammed, start a new one. Another hint: pocket folders come in several colors, so let’s say you’re starting a new folder for history assignments and the existing history folder is blue. Also make the new folder blue, creating a family look for the students history assignments.

Sharon Mann is President of the I Hate Filing Club, a group of nearly 100,000 office professionals who hate filing but love finding new ways to become more organized. For information about how you can get new ideas, sample new products and connect with your peers, visit www.Pendaflex.com.