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On Having a Financial Safety School Thumbnail

On Having a Financial Safety School

By: Mike Earl, CFP®, CPWA®

Is your child or grandchild familiar with the concept of a “Financial Safety School”? High school students know well the concept of a “safety school”: a college that is almost certainly going to accept them. There are also “reach” colleges where acceptance is far from guaranteed, and “target” colleges where acceptance is likely but not a sure thing.

A financial safety school is one where the costs are reasonable for the family. It won’t be easy to get your child fired up about the idea of finding a financial safety school. As one article put it, “The act of drawing up college contingency plans is entirely antithetical to the passion-filled optimism pulsating through the average teenage brain.” But it’s something that should be done.

So how do you determine what “reasonable costs” are? As with any financial decision, the first and best thing to do is compile as much data as possible. Meeting with your fiduciary financial planner is also a critical step, as it’s crucial to review how paying for college will impact your financial plan.

If your child is considering 5 different schools, start researching the costs. And how do you do that?

It’s amazing how much technology has improved in the 18 years since I was applying for college. Today, most colleges offer “Net Price Calculators” at their websites, so Johnny (or Mom and Dad) can obtain an estimated cost for the school in question. 

These net price calculators will vary in complexity based on the institution. For the University of Minnesota – Twin Cities, for instance, the net price calculator takes about 20 minutes to complete. On the other hand, at my alma mater, Wheaton College, the net price calculator takes just 60 seconds. The output from Wheaton College looks like this:

That’s a lot of coin.

For most high school students, the decision of where to attend college is often a “gut feel” decision. They typically are not putting together elaborate spreadsheets filled with empirical data to make their college decision. Maybe they have a high school friend going to the school. Maybe it’s just a college where the weather is better. Maybe they visited and liked the campus vibe. Maybe a relative attended there. 

The point I am making here is that students can be happy and successful at any number of colleges. We should move away from the notion of a “dream school”; a bit of idealism is of course natural and okay, but pragmatism here should rule the day. If only because the dollars at stake are so massive.

So if a child is deciding between a school that would cost $10,000 per year (thanks to generous need and/or merit-based aid) vs. one that would cost $40,000 per year, you have to do the math. The difference in cost isn’t just the $120,000 cost differential during the 4 years of college. It’s also the long-term opportunity cost of how that extra $120,000 could have been deployed:

  • After 10 years at a 7% return, that $120,000 would balloon to $236,000.

  • After 20 years, it’s $464,000. 

  • These figures are being run for just one hypothetical child. How much more impactful for families with two or more children?    

With student loan debt in America now over $1.5 trillion, and with so many Baby Boomers behind on retirement savings, the college decision is crucial.

What does this mean to you, our client?

Let’s talk about this subject together. And let’s plan ways for you to communicate with your children about this subject. The more openly and early you have discussions about college costs with your children, the better prepared they will be to make an informed decision. We are passionate about this subject, so lean on us for advice. We’re here to help.


1) https://npc.collegeboard.org/student/app/tcumn

2) https://admissions.tc.umn.edu/costsaid/schol_campus.html#need

3) https://www2.wheaton.edu/NetPrice/npcalc.htm

4) https://www.marketwatch.com/story/student-debt-just-hit-15-trillion-2018-05-08

5) https://www.collegetransitions.com/blog/picking-a-financial-safety-school-fss/

Because The Wealth Group, Austin B. Colby & Associates is independent of Raymond James, the expressed written opinions above are our own and not necessarily reflective of Raymond James’ opinions.