My unconventional plans to pay for my daughter’s college education

I just sat down to write this post a moment ago and literally stared at the screen for twenty minutes. I'm still ready to bolt out the door at a second's notice, if needed, and the tears won't stop rolling down my face.

But thankfully, these are good tears.

My mother told me I might feel this way on my daughter's first day of kindergarten. Like it or not, the little person I gave birth to five years ago is no longer a baby, but a little girl.

A fearless little girl.

I looked into her eyes this morning and told her how much I loved her.

“I'm so proud of you,” I said, with tears in my eyes and a knot in my stomach.

“Stop worrying, momma,” she said.

“You know I can't,” was all I could say as she beamed with excitement for her first day at school. Then the bus turned the corner and she smiled and took off without a care in the world.

Moments later, she was gone.

I'm so happy for her, but I'm also afraid. At home, I can keep her safe. I can protect her. But at school, she's on her own — left to navigate a big, scary world without my help.

As a worrier, I also think a lot about what happens next — maybe too much. Her school career may have just started today; but we all know that, just like the last one, this chapter also has an end. And when that day comes, I will no longer have a kindergartener, but an 18-year-old young adult. I've been around long enough to know that it will be here before I know it. And as I plan for her future, I often wonder, “Am I doing enough?”

The growing costs of a college education

My oldest daughter was born in 2009 — a year when the average cost for an education at a four-year college or university came in at around $21,093 in today's dollars. And now, just five years later, College Board statistics show that the costs of a four-year-degree skyrocketed to an average of $30,336 for the 2013-14 school year.

But these huge tuition rate increases aren't exactly a new trend. A recent Bloomberg chart-of-the-day shows that the average costs of higher education have exploded over 500 percent since 1985 — the exact year I turned five-years-old. To put that number into context, medical costs grew 286 percent and the consumer price index increased 121 percent during the same time period. In other words, college costs grew faster than almost anything else.

But all of that is out of my control. Try as I might, there is literally nothing I can do to keep spiraling tuition fees in check, or ensure that a college degree is within her reach when she comes of age. When it comes to the cost of college, I can only watch in despair as the news goes from bad to worse.

But I do have some control on my end. I can do what I do best, which is to save, save, and save some more. Other than that, I can only hope and pray that things will be better for her than they are for today's generation of aspiring students.

College savings: What we're doing so far

I'm glad I realized how important this issue would be to me so early in my daughter's lives. The truth is, I've been socking money away for them since they were babies. It all started with money they received from relatives when they were born, or “free money” as I saw it.

Money that was likely meant for diapers and formula always made its way into my children's savings accounts so fast their little heads would spin if they knew it. Then, once my second daughter was born, I started a 529 account in each of their names. And that's when the savings really started to grow.

Since then, we've socked away any money they've gotten for birthdays and holidays, and contributed small amounts monthly ourselves. It all adds up.

In fact, it really is amazing how small amounts of money can grow over the months and years of a child's lifetime. It's hard to believe it, but my children already have thousands of dollars saved for college at the young age of 3 and 5. Still, I'm afraid it won't be enough. That's why, a couple of years ago, we started looking for other ways to grow the amount of money we would have available to pay for their college. And we didn't need to look far.

Using rental income for college tuition

My husband and I became unlikely landlords in 2007 at only 27 years old. Our first rental was a small brick ranch home we chose to buy on somewhat of a whim. Shortly after its purchase, we turned our first home into a rental and upgraded into a slightly larger, nicer home for ourselves.

We weren't sure what we were doing all the time, but we've always been happy to learn as we go and fly by the seat of our pants. And mostly through trial and error, we have learned a lot since then — so much that I've come to see our inexperience as a good thing. In a lot of ways, we were just too dumb to be afraid, which is probably the only reason we became landlords in the first place. In a strange twist of fate, it appears that our lack of awareness might have led to our best financial decision so far.

Regardless, we were making plenty of progress on the home's respective 30-year mortgages by late 2011, but we still had many years left to go. But it was around that time that home mortgage rates began hitting record-lows and, as always, my wheels started turning.

I wondered if it would be possible to refinance our loans into loans with shorter, more-favorable terms. If we could, we might be able to move the process along and free up thousands of dollars of monthly income in the process. Even if we couldn't refinance for some reason, I thought it was worth a shot.

Persistence pays off

Anyone who has ever refinanced a home knows what a huge pain the process can be. Well, trust me when I say that refinancing a rental home is an even more difficult experience then refinancing your primary residence. With both homes, the ordeal was somewhat of a nightmare.

Fortunately, after several months of trying and plenty of heartache, I was able to get both of our rental homes moved onto 15-year-loans. And amazingly, with a substantially lower interest rate, the monthly payments hardly budged. That means that our current rentals, while temporarily less profitable, will now be paid off in approximately twelve years — just in time for our daughter to turn 17. They currently rent for a little less than $2,000, but should rent for quite a bit more by then. And, if all goes as planned, most of that money will go straight into the college funds of my little girls.

Sometimes all we can do is save

The fact that the cost of a college degree has risen over 500 percent since I was my daughter's age does not bring me comfort; but again, I can only control so much. I can't change the fate of higher education any more than I can sit in my daughter's school today and hold her hand.

I'm sure we're all afraid of what kind of world our children might find when they graduate from high school. And if not, we probably should be. But we all know deep down that there is nothing we can do to soften this world for them. So we do what we can, and sometimes it means that all we can do is save for them and hope for the best.

On my daughter's first ever day of school, I want her to know that I am proud of who she is and excited to see who she will become. And I want her to know that I'll never stop worrying about her future, even if she asks.

I'm her mother, after all, and it just isn't possible.

Are you worried about paying for college? Do you have any unconventional ways to pay for college?

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