What if you've saved little for your kid's college?

Ingrid Case picture

I write a lot about 529 plans, which let consumers invest money and then spend the gains on higher education tax-free.

But a 529 plan plays only a modest supporting role in the plans my husband and I have made for what we hope will be our son's college education.

It's not that we think a 529 is a bad idea. On the contrary. But there have always been more pressing uses for the money.

Instead, the plan goes like this: Before we were married, I bought a condominium. I lived there for four years, and then I married and moved but kept the condo as a rental.

In about another four years, I will have finished paying off the mortgage on that property. We will then take an equity loan when it's time for our kid to head off to college.

Future renters will pay back that mortgage, I hope, just as they are paying off the first.

We could sell the property to pay for the kid's college education, of course. But if we take out a loan against the property instead, we get to keep a valuable income-producing asset.

How are we going to pay for this?

Sallie Mae asked parents what sources they expected to use to pay for college.

Source
Parent savings or current income 30%
Scholarships 16%
Student loans 18%
Government grants or financial aid 16%
Children's savings or current income 8%
Parent loans 8%
Grandparent/friends/family contributions 5%

Source: How America Saves for College 2014 poll

Not all parents have the ability to provide even this much money for their kid's college education.

First of all, you shouldn't apologize, says Ron Lieber, who writes the Your Money column for the The New York Times.

I think our son has a nice life. Yes, sometimes I wish I had pursued a more lucrative career. But I'm passionate about my work, and I appreciate the amount of time it has allowed me to spend around our kid, both values that I hope he'll continue to appreciate.

Next, Lieber recommends against keeping secrets from one's children. We will certainly tell our son what we can and can't afford.

My husband and I are both graduates of a small, fancy-pants college, and there is simply no way that we could pay full price to send him there.

He knows this.

We're not shy about asking advice from our friends who also plan to seek financial aid or who already have. We applied to a private middle school for our son this year (he was wait-listed), in part to have a dry run at filling out financial aid forms.

My husband took a gap year between high school and college. There's no reason our son can't do the same thing, particularly if it gives him time to earn money for school.

We have a sentimental tendency to imagine our son at our alma mater, but the truth is that there are lots of colleges in the world, and nearly all of them are less expensive than the challenging, bucolic place we attended. A year there currently costs just less than $60,000.

Only God and the actuaries know what it will cost when our kid is 18. Maybe one of those cheaper colleges will be a good fit for him.

How much has the typical parent saved for college?

Age of child Amount saved
0-6 $10,282
7-12 $16,498
13-17 $21,416
Average for all ages $15,346

Source: How America Saves for College 2014 poll

It's also important for us — and every parent in similar shoes — to remember that although typical college sticker prices are horrendous, the average amount students pay is much more manageable.

According to data published by The College Board, the average price — tuition plus room and board — of a private four-year college is about $31,000 a year. On average, however, students are paying about $23,000.

Net tuition and fees for these schools are lower in inflation-adjusted dollars in 2013-2014 than they were a decade earlier.

Even our expensive alma mater, it says, offered students an average of $40,569 in aid for the academic year that just ended.

Granted, that aid includes student loans. But a quick browse through the college's financial aid estimator (many schools have these on their websites) suggests that we'd be on the hook for approximately $11,000 a year in out-of-pocket costs.

We can do that. And although we're not done until he's graduated, knowing this stuff is still a great relief.