Successful Education Planning
There are valuable financial resources available for students interested in college, including financial aid in the form of grants and scholarships for which they are eligible. However, waiting to see how much funding for college your child will receive is not the best financial plan.
Planning for your child’s college education includes factoring in the rising costs of tuition so you know how much to invest and save and implementing the most advantageous strategies in order to meet your education funding goals.
Step 1: Estimating Costs
How Much Will You Need?
The cost of private or independent California colleges can be as much as $50,000 per year. California public colleges (CSU and UC systems) offer lower tuition rates to in-state students, but the cost of tuition, fees, books, supplies, room, and board at the state schools can still average between $25,000 and $35,000 per year.
Cost Factors to Consider:
Type of Institution
While you want the very best education possible for your child, attending a private university or college — especially an Ivy League institution — will cost considerably more than a public institution.
Tuition for in-state residency is almost always less expensive than out-of-state tuition. It can also affect your child’s eligibility for some types of financial aid.
Tuition & Fees
Some institutions may charge a set tuition rate, while others may charge per credit hour. Fees are additional charges some institutions charge to cover the costs of services like technology or lab fees.
On-campus housing costs vary greatly depending on the amenities offered, residence hall, and type of room configuration. Many institutions bundle room and board to include their on-campus meal plan as well.
On-campus meal plans are typically more expensive than groceries and cooking, however many colleges require at least freshmen, if not all students, to purchase a meal plan. Some meal plans are bundled with your student’s housing costs.
Textbooks can be a significant expense regardless of the institution, and vary depending on the program of study as well. Additional costs to consider include transportation, insurance, dorm furnishings, and other personal expenses.
While the amount you’ll need to save for your child’s education varies considerably depending on a wide range of factors, this College Savings Calculator can help get you started with a general estimate.
Step 2: Funding Options
College Funding Options:
Grant’s are a form of financial aid that (with some exceptions) doesn’t have to be repaid. Grants are usually distributed based on financial need rather than merit.
Scholarships are awarded based on need, merit, field of study, ethnicity, religion, and more. They do not need to be repaid, however most have rule requirements for continuing to receive aid.
Student loans are borrowed from the federal government and generally must be repaid. However, there are many new opportunities for student loan debt relief and forgiveness.
College Savings Accounts
Various types of accounts can be used to save for college, including 529 Plans, Coverdell ESAs, Roth IRAs, UTMAs, UGMAs, and trusts.
The American Opportunity Tax Credit (AOTC) and Lifetime Learning Credit (LLC) help with the cost of higher education by reducing your tax burden.
The Federal Work-Study Program provides part-time jobs allowing students to gain career experience while also earning money for college.
Most higher education establishments offer a payment plan which allows you to make monthly payments to pay for the cost of their tuition.
If your child has served, or is currently serving, in the military, they may have access to education benefits earned through their service.
Different Funding Strategies
Grants are free financial aid (from the U.S. Department of Education) awarded to students and families based on financial need. Because these grants don’t have to be repaid, they can be a huge help for families with a short timeline for planning and saving for college expenses.
Both federal and state governments offer grants to eligible applicants. To apply for government grants, you must submit the Free Application for Federal Student Aid (FAFSA®).
Also a form of free financial aid, scholarships are awarded based on merit rather than financial need. There are many different types of college scholarships available including those for academic or athletic excellence, minority students, field of study, and more.
Like grants, because scholarships don’t have to be repaid, they can be a huge help in offsetting the cost of a higher education. Sallie Mae offers a free Scholarship Search for more than 6 million college scholarships.
Federal student loan programs can help finance a college education, and there are now many opportunities for student loan debt relief and forgiveness. As the rules and requirements for student loan forgiveness are still in flux, it’s best to assume you’ll need to pay it back (with interest) as you would any other loan.
The William D. Ford Federal Direct Loan Program is the largest federal loan program. It offers fixed interest rate loans to students and parents. Sometimes though, creditworthy applicants might get a better interest rate with a private student loan than a federal loan.
Loans are a helpful way to bridge any gaps, but we recommend exploring your other funding options first, as there are better ways to afford the cost of higher education.
College Savings Accounts
Various types of accounts can be used to save for college. The right type of college savings account (or combination of account types) depends on your own unique situation, as each comes with very specific rules and requirements. In general, while UGMAs, UTMAs, Roth IRAs, and Trusts offer some unique planning opportunities, they will not serve most families as well as 529 plans or Coverdell ESAs.
Money saved in 529 Plans can grow tax-free until you’re ready to use it, at which point you can make withdrawals without paying taxes provided you use the money for eligible college expenses.
529 plans are state-sponsored, but you can pick a plan from any state. However, since many states offer substantial financial incentives for using their in-state Section 529 Savings Plan, it usually makes sense to start by looking at your own state’s plan. Use the Schwab 529 State Tax Calculator to see whether your state offers a tax benefit for 529 plan contributions and, if so, how much it might be.
Based on financial need, student aid from the Federal Work-Study program provides a way for students to earn money to help pay education expenses.
Jobs are either on campus (working for the school), or off campus working for a private nonprofit or a public agency, or with private for-profit employers doing work relevant to the student’s course of study. Additional restrictions on the types of jobs assigned depend on the student’s college or university.
Another helpful way to bridge any gaps, a payment plan allows for monthly payments to cover the balance of costs after exhausting all the free aid and savings available. You’ll pay an administration fee, but in some cases a payment plan might be a better option than taking out a student loan.
For those who have served, or are interested to serve, the military pays up to 100% of college tuition while on active duty. There are also several GI Bill programs available to help pay for college tuition, job training, and other approved training.
The VA also offers education benefits to help Veterans, service members, and their qualified family members with college tuition.
Step 3: Create A Plan
At Rowling & Associates, we can help you give your child the gift of a college education with a plan tailored to your individual needs, including:
- Assisting with estimating your child’s college education costs.
- Discussing all the various funding options available to you, with the pros and cons of each as it relates to your unique situation.
- Developing a strategy for additional investing/saving to meet your college funding goals.
- Explaining the benefits of a 529 Plan and how to take advantage of the plan.
- Recommending a top-rated 529 Plan best suited for you.
- Addressing other concerns related to planning for and funding your child’s education.
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The Gift is Yours to Give.
Contact Rowling & Associates today to schedule an introductory college financial planning meeting to see how we can help you give your children the gift of a college education.
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