As a Financial Advisor in the Buford, Suwanee, and Sugar Hill Area, I talk with parents all the time about paying for college. There are a lot of factors to consider, and many parents don't know where to begin! Here you'll find a framework for understanding and beginning to plan your journey to funding a university degree for your kids (or yourself).
At this point, it almost goes without saying: College is Expensive! Over the last forty years, the average price of tuition, fees, room and board has risen 169%. The typical yearly cost of attending a public, in-state college is up to $25,290, while out-of-state colleges have risen to $40,940 yearly and private universities cost $50,900. Understandably, this has many parents wringing their hands trying to figure out how to pay for such a high priced education. For parents of more than one college-bound student, the cost of sending all of their children to college can feel astronomical! I should know - I'm a parent of four bright minds, myself.
Never fear. We can do this! Paying for college does take a good bit of forethought and careful planning, but it's not the insurmountable task it may seem. Every year, thousands of students just like yours and mine find ways to go to school. In fact, in 2020, there were 19.7 million college students in the U.S. With the right plan, many families can find a way to make it work.
One of the major obstacles I see in working with families on funding college is a lack of understanding of what goes into a well-thought-out plan. Parents feel overwhelmed because they don't know what options they have, what actions they need to take, and when they need to take them. In short, they don't have a framework for education planning. For that reason, I've put together both a framework and a timeline to understand the big picture of planning for education, and I'll explore the details of each segment in subsequent posts.
The Framework for College Planning
There are fundamentally five main options for funding and/or reducing the cost of college:
Student Loans. Unfortunately, many families start and stop their planning here, but loans can be a part of a well-thought-out plan.
Scholarships. Perhaps the most under-utilized resource for college funding, scholarships are a powerful source of potential funds.
Savings. Ideally, savings should be optimized for both tax advantages and scholarship opportunities. Here's a breakdown of options for saving for college.
Income. Similar to Savings, funding strategies related to the parents' or student's income should be optimized for both taxes and scholarships.
Outside College Credits. Many institutions accept transfer credits from courses completed either in high school or at lower-priced institutions elsewhere.
We'll explore each of these options for college funding in further detail in other posts. There's a lot of overlap between them, with each item typically affecting one or more of the others. For example, how and where you've chosen to save may impact what types of student loans and scholarships you have at your disposal.
One giant factor that bears mentioning here is the FAFSA form. The FAFSA, which attempts to measure the financial resources your family has available for funding college, is the beginning point for college planning because it relates to the first four funding sources: Student Loans, Scholarships, Savings and Income. In short, both government and private institutions use your savings and income information on the FAFSA to determine eligibility for loans and scholarships. Here's our post with more detail on how the FAFSA affects financial aid.
Taken together, these items comprise what options are on the table, but we also need to think about when we ought to pursue them. Below you'll find a timeline for when to take specific actions in the college planning journey.
The College Planning Timeline
Here is the basic college planning timeline. It gives a general overview of the five stages of planing for funding college.
If you're looking for a detailed, step-by-step plan for getting college funded, you might want to check out our Ultimate College Planning Checklist. It lays out a complete list of tasks and when you should execute them to maximize your college funding opportunities!
Here are a few notes on understanding the general timeline:
Before Applying to College: It's important to think about how and where to start saving for college long before your student is gearing up to apply to schools. The reason is that need-based financial aid programs will typically look at financial information from the prior two years to inform their aid decisions. If you've waited too long to start arranging your finances to maximize aid opportunities, you could be leaving money on the table. Additionally, taking an academic path that will allow your student to knock credits out while in high school requires planning their academic journey ahead of time.
During the Application Process: The FAFSA should be completed as soon as it becomes available in the Fall of Senior Year. The reason is that a host of government and private scholarships require the FAFSA, and funds for those scholarships can run out even if you would have qualified. You want to be first in line to receive assistance, not last.
During College: Continue to manage your scholarships and financial aid situation. Because many financial aid programs look at the last two years of financial information, financial decisions you make while at university can still impact your financial aid.
Taking Action
Hopefully, you can now see the complete picture of funding a college education, and you've taken a moment to place yourself on the timeline to think about what actions you can take to maximize your funding opportunities. Perhaps you've noticed one or two promising funding options that have been neglected so far in your planning process. What now?
Each of the funding strategies outlined in the framework we discussed above is a complex topic that requires research and careful forethought. Take a moment to think about which strategy you'd like to dig deeper on, and then get to work! Peruse our blog for more college funding articles, or, if you'd like an expert's opinion, reach out to a financial planner who specializes in education planning, like us!
If you have questions about your specific college planning situation, feel free to reach out to us! Call us at (678) 333-5626, send us an email at info@polarisassetmgmt.com, or drop us a line here: