10 Steps To Funding A College Education
April 29, 2019So what does college planning look like in the real world? When my wife and I began planning for our kids’ college, we had to make some educated guesses. Now that we have a couple kids in college, it’s fun to look back at how our plans have shifted as our kids matured.
For example, when my daughter Rachel was 12-years old, I was hoping she would attend the University of North Carolina, so her mother and I at the time planned on paying for her tuition, leaving her to come up with the money for books, fees, and other expenses. At that time, her grandpa had already contributed $6,000 toward her education, so we started saving another $280 a month to meet our goal.
Of course things change, and Rachel chose a small, out-of-state Christian school for her education, which is more expensive than staying in-state, so while we have been able to help with much of her tuition, Rachel has had to take on some student loans to plug the gap in addition to the scholarships she earned.
Our second child David is also in college, and like Rachel, what college looks like for him is different than we originally thought. The biggest surprise is that Rachel’s private education costs about the same as David’s state school because Rachel earned scholarships based on her grades, whereas David did not.
We still have two boys at home, and we’re not sure if they’ll both attend college, but we have saved enough so that we can help each one out a little, knowing that if one sibling does not use all of their college savings, we can always use it for another one.
Since college planning is often a top concern for parents, here’s a checklist to help you plan, whether your kids are 2 or 17.
College Planning Checklist
Step 1: Decide what your college planning will include
Do you want to fund a private or public education? Will your child attend a community college or head straight to a four-year university? Are you planning to pay only for tuition, or will you also plan on covering books, fees, and room and board? Do you hope to cover 100% of the cost, or will you plan on sharing the cost with your student?
Obviously there’s a lot of guessing involved here, especially if your kids are still babies, but go with what you think is reasonable or desirable, knowing that you can always adjust the plan as your kids grow.
Step 2: Explore the current cost of education
The average published tuition for a four-year public school last year was around $10,000 a year ($35,000 for private) according to the College Board. When you add in room and board that number climbs closer to $20,000 ($47,000 for private). If you have a specific school in mind, go to The College Board Web site and look up the current cost associated with your school of interest.
Step 3: Based on steps 1 and 2, determine how much you’ll need to save
Use the Education Savings Estimator to calculate how much you would need to save each month in order to attain your savings goals. Remember, college expenses are inflating at around 3.1% a year, but your school’s inflation rate may be different.
Step 4: Choose a savings vehicle
Most people assume that a 529 college savings account is the best way to go, and for many people, it is. Make sure you consider the pros and cons and are aware of the alternatives as well.
Step 5: Forecast your child’s eligibility for financial aid
Use the College Board’s EFC calculator to estimate how much financial aid may be available for your child when he or she attends college. To learn more about the different forms of financial aid, check this blog post.
Step 6: Complete the FAFSA as soon as possible
In October of your child’s senior year, go to www.fafsa.ed.gov and begin the process of applying for financial aid. Based on information you provide on this application, your child will receive a financial aid package from each school to which they apply. Some school-based aid is first come, first served, so the earlier you complete the form, the better your chances of qualifying for limited aid.
I also think it’s worth mentioning that everyone should complete the FAFSA, even if you think you won’t qualify due to high income or savings rate. You never know and there’s no harm in applying, even if you don’t accept any of the aid offered.
Step 7: Apply for scholarships
In addition to completing the FAFSA, talk with the guidance counselor at your child’s high school about local and national scholarships he or she may be eligible to receive. Have your student complete scholarship applications based on the counselor’s suggestions.
Step 8: Choose a college
Whether it’s two years at the local JC, or straight off to the four-year university, choose a school that offers your student the best environment for success. Although yours truly made his decision sight unseen, a campus visit is probably a good idea.
Step 9: Consider nontraditional sources of funding to help pay for education
In addition to college savings accounts and financial aid, shortfalls can be covered by home equity loans, retirement savings accounts, cash values in life insurance policies, gifts from friends and family, or current income.
Step 10: Take advantage of tax benefits for education
Whether it’s tax-free distributions from college savings accounts, deducting interest paid on student loans, or claiming an American Opportunity or Lifetime Learning tax credit, you should take advantage of all tax benefits available to help offset the cost of education.
There you have it. Ten steps to funding a college education. All that’s left is watching your child walk across the stage to accept their diploma, just don’t forget the camera and tissues. 🙂