3 College Funding Tips For The New School Year
Are you a parent experiencing a mix of emotions as a new school year begins? Is part of you relieved to have the kids resuming their routine, even if it’s chaotic? Is another part of you anxious, aware that it is just a matter of time until your student will need to make decisions around whether to go to college and how to fund it?
Following are three steps for initiating the college funding conversation and planning process.
Step 1: Set a goal. Everyone has different education needs. Some people have skills that are best suited for specific trades or vocations. Other individuals require completion of specific two-year education training to be qualified to do what they want professionally. And still other students aspire to having a four-year college experience. There is no one-size-fits-all education strategy for every type of student need.
Ask your student what she wants to do to earn money to pay for her bills after graduation. If she is certain about what she wants to do, her education goal is clear: to acquire the requisite training to deliver in that job. If she doesn’t know what she wants to become professionally, it may make sense for her to take a few classes at the local community college while working part time to determine what she enjoys and is good at, before investing all of her time, energy, and significant finances into a multi-year college experience. The key to this step is to develop a clearly defined education goal that will set up your student for success realizing her professional dream.
Step 2: Know your numbers. After confirming your student’s education goal based on her needs, have a candid conversation about the finances necessary to fund her education goal. Colleges generally expect students and their families to help pay for education costs to the extent that they are able to afford doing so.
1. What is the sticker price published by the institution offering the education your student needs?
Sticker price is the published price for education and related services delivered through college. Broad categories of services that offer sticker prices include tuition and fees.
2. What financial aid and tax benefits might be available?
There are four main sources of financial aid: federal government, state government, colleges and universities, and private organizations. Various factors are considered when assessing whether aid will be made available, from the total cost of attendance to the Expected Family Contribution (EFC: how much the federal government believes a family should be able to pay for college out of pocket), to whether the aid is merit-based or need-based, the year in school, enrollment status, among other points.
Even if you don’t think you will qualify to receive aid, complete the Free Application for Federal Student Aid (FAFSA). The federal and many state governments, as well as many colleges and universities, use the content you provide in this application to assess whether you are eligible to receive grants and scholarships (which you don’t have to repay), work-study job opportunities, and loans (which you do have to repay).
Additionally, there are a variety of tax-efficient ways to fund college, from tax-deferred savings accounts to tax credits and tax deductions. In light of the recent tax legislation changes, it’s best to refer to the IRS web site and your accountant to clarify which tax solutions are most suitable for you.
3. What is the net price to the family?
Net price is the difference between the sticker price published by the college and the financial aid and tax benefits uniquely available to your family and student. This is the real amount of money that a family typically pays for college. The sticker price may differ significantly from net prices. According to the College Board, in 2015-16, the average sticker price of in-state tuition and fees for public four-year colleges was about $9,410, but the average net price was about $3,980.
Who can help pay for the costs? How much money can they contribute, and when?
Step 3: Create – and stick to – a plan. With your student’s goal as your focus, and your numbers as your guides, set a timeline for identifying the right institutions for your student’s needs and agree to a budget that you will keep to make your student’s education dreams a reality. Recognize that the final decision for where your student will obtain her education must be one that satisfies her head, her heart, and the wallets of all individuals financially contributing to her success. You and your student are not alone in this process. The Federal Student Aid web site, your local Certified Financial PlannerTM, and Financial Aid officers for the institution your student wants to attend are just some of the many resources available to assist you.
Caroline Wetzel is a Certified Financial PlannerTM (CFP®) and Vice President, Private Wealth Advisor with Procyon Private Wealth Partners, LLC. Procyon Private Wealth Partners, LLC and Procyon Institutional Partners, LLC (collectively “Procyon Partners”) are registered investment advisors with the U.S. Securities and Exchange Commission (“SEC”). This article is provided for informational purposes only and for the intended recipient[s] only. This article is derived from numerous sources, which are believed to be reliable, but not audited by Procyon for accuracy. This article may also include opinions and forward-looking statements which may not come to pass. Information is at a point in time and subject to change. Procyon Partners does not provide tax or legal advice.
Procyon Private Wealth Partners, LLC and Procyon Institutional Partners, LLC (collectively “Procyon Partners”) are registered investment advisors with the U.S. Securities and Exchange Commission (“SEC”). Information in this message is for the intended recipient[s] only. Please visit our website: www.procyonpartners.net for important disclosures.