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College Costs: 3 Common Mistakes Physician Parents Make


Over the years, I have seen many physicians make mistakes when planning for their children's education costs. Here are three of the most common.

An important part of the financial planning process for my physician clients is the development of a plan to pay for the education of children and grandchildren. 

Over the years, I have seen families make several mistakes in this regard. Here are three of the most common:

1. Incurring unreasonable costs
One common financial mistake I see is picking up educational costs that are unreasonable for the parent's level of income and savings. 

It is increasingly common to see pre-tax (what you have to make to pay for college) costs of one-half million dollars for four years at a private college.  Unless you are making close to seven figures, or have saved aggressively since your child was born, you may impair your own ability to retire by paying for this. Having the child take out loans, however, is often a crippling blow to their financial future. Think long and hard about whether the cost is worth it. 

I told my own children that we would pay the full cost of a public college education, but that any costs over this were their own to assume.  Guess where they went. 

I’m not arguing that an education at Stanford or Harvard or Julliard is not worth the money.  But give careful consideration to whether the price of a non-Ivy or specialized education is worthwhile.

2. Not using a 529 college savings plan
Another financial mistake is not using a 529 college savings plan early in the child’s life.  These plans allow after tax money deposits to grow tax free if the money is used for a variety of educational costs.  These plans can change beneficiaries and can even have money pulled back (with a small penalty and usual taxes) if so desired.  Benefiting from almost two decades of time by starting early is a great idea.

3. Overlooking great options
Thinking about and setting the stage for where your children might attend college also touches on a non-financial mistake I see some families make.  In the quest to attend the “best” school possible, I see families push their children (who are also sometimes pushed by their high school and their peers) into applying to a number of high tier schools that have become almost impossible to attend. 

The Ivy League schools have stacks of applications that they turn down from truly exceptional young people.  The chance that your child has of getting in is slim in most cases.  Setting expectations that your child will “fail” if he doesn't get in seems a shame. 

Perhaps taking the attitude that the “University Of” public school in your state is a fine first choice is a good start.  Then perhaps send off a couple of “long shot” applications to long shot colleges with the understanding that they are lottery tickets. 

In his new book, “David and Goliath,” Malcolm Gladwell finds that many exceptional students would have been better off at the top of a “lesser” college than at the bottom half of an Ivy League institution.

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