In college planning, time, study, patience and practice can provide many of the needed tools to plan and fund for college – if you know where to look. The problem is: Do you really want to practice on yourself?
There is so much more to college planning and funding than just saving for the big event. A real return can be had by saving “on” the cost of college rather than just “for” the cost of college. Most concentrate on the funding aspect rather than the cost-reduction aspect. This requires some real study, interaction, and knowledge of the rules of the game.
There are many places to save for college today with the 529 college savings plan being in the forefront for most advises. But is a 529 really for everyone? The answer to this question can save thousands of dollars. In fact, most decisions in the planning process can be expensive ones.
One of the most valuable decisions in college planning is the correct choice of schools; not because the parents attended or the sports team is the favorite, but rather for the purpose of a rewarding career at a reasonable cost. This decision is not about the next 4-6 years. It is about the next 46 years. A college planning professional can be most helpful in helping the parent and student to a greater understanding of the impact of this decision.
The cost of college increases with each additional year in attendance. The last year, all things equal, is the most expensive due to annual cost inflation which is now increasing as much as three times normal inflation. Changing majors or transferring schools can add tens of thousands of dollars to the cost of an education.
There are many good websites for information for those do-it-yourselfers not interested in working with a college planning and funding professional. Among those I recommend are:
For those who would like to investigate the use of a professional, most offer a free consultation. It is a good starting place to see if there could be a match for your family. A professional should offer more than just a 529 plan. At the least, you should get a good estimate of your Expected Family Contribution, college cost comparisons, college details for dates, requirements, demographics, and aid availability and if that aid is “free” money or has to be repaid. Services that might be offered include college, major and career searches.
A student spending two years in college before realizing they have no interest in the major they’ve selected will add greatly to the cost of education. Consider that schools and students, both, have personalities. This is a discussion that can prevent costly transfers, again increasing the cost. Ask if the planner evaluates aid offers and loan offers to find the best ones for your needs. Ask if they understand and provide leveraging?
Some people feel it is not a good idea to pay for help in filling out the Free Application for Federal Student Aid. I’ve never understood this. We pay for software and for help in filling out our free tax forms. The FAFSA is longer and has some pretty difficult questions for many to handle on their own. Ask if the planner can help with this and the CSS Profile – the equivalent for many private colleges.
College costs are rising daily and the average student loan debt is nearing $26,000 a student. A four year education, if actually completed in four years, can easily have a price tag of more than $100,000. Some exceed a quarter million dollars. Today’s student, on average, is taking five and a half years to complete their education and most colleges do not graduate 50 percent of their enrollees in six years. Every $1,000 per year saved on a four-year education could, in 25 years, averaging a 7 percent return, impact a student or parent’s retirement account by almost $22,000.
Using patience and perseverance and the websites listed above, one can go a long way towards helping a parent to a better college-funding decision and the student a more rewarding college selection. My suggestion, however, would be to set a free consultation with a professional to learn what options and opportunities may be present for your individual situation. An informed decision is a better decision.
George Scott is a college planning and funding specialist with Seeds of Wealth College Funding Solutions in Irmo. Reach him at collegeplanning@seedsof wealthfinancial.com or (803) 781-3600.