Marketing Manager, Michigan Education Trust (MET)
March 9, 2015
During the course of any conversation I have concerning saving for college with a 529 plan, parents will inevitably ask, “What happens if my son/daughter gets a scholarship?” I understand the question; it’s a valid one. Parents are considering investing their hard-earned money and they’re looking at all the possible outcomes that may affect their investment. Those are important questions to ask.
But, if you’re a parent that’s putting off saving for your child’s education because you believe your child will attend college on an athletic scholarship, let me share a word of caution – the thousands of dollars you spend in supporting your student athlete will, most likely, not translate into college dollars.
Student athletics have numerous advantages for your child, including obvious physical benefits and team building skills. To participate in today’s youth sports programs you generally have to join a club, purchase uniforms and equipment, and transport your child to and from practice. These are the minimal costs. The larger expenditures start to add up when your student athlete starts to travel to out-of-town tournaments and attend sports camps. All of these expenses can easily add up to several thousand dollars per year and many parents pay these costs because they believe this is the way to ensure their child receives that athletic scholarship.
The reality is that for the vast majority of student athletes, there will be no athletic scholarship in their future. According to ScholarshipStats.com a little over 7 percent of high school students go on to compete at the varsity level of college and only approximately 2 percent go on to play at the NCAA Division I level. Of these gifted athletes, the vast majority will not receive a scholarship that will cover their full cost of attendance. Scholarshipstats.com’s data indicates that for four-year colleges with varsity sports programs the average college athletic scholarship award is $6,474 while the average annual cost of attendance (tuition, fees, room and board) is $36,506 leaving an annual shortfall of $30,032. That means that as a percentage, that coveted college athletic scholarship is only meeting 18 percent of the costs, leaving 82 percent of the cost to be paid by the student and family.
The unfortunate reality for many families that hope for athletic scholarships to pay for college is that they will discover at a time too late that their original plan is not going as expected. Had those same parents invested the money they spent on youth athletics in a 529 college savings plan they would find themselves in a much brighter financial situation.
So, why not consider an alternative? Focus on saving for college in a 529 plan AND encourage your student athlete. Even though you may not get that scholarship, you’ll have a nice nest egg to send your child on to academic success. And, if you’re one of the lucky few who do land an athletic scholarship, you’ll end up borrowing much less!
About the Author
Jim Peterson is the Marketing Manager of the Michigan Education Trust (MET) a 529 prepaid tuition plan. Michigan also offers the Michigan Education Savings Program (MESP) a direct sold 529 savings plan and the MI 529 Advisor Plan (MAP) a broker sold 529 savings plan. The combined assets of the three programs is approximately $5.5 billion.