By Blaine Blontz, MBA
Parents of college-bound students often wonder how to successfully navigate the world of college savings and financial aid, hoping to have their son or daughter graduate from college with minimal stress and debt. Of course, young adults are increasingly exiting higher education not only with a diploma but also a significant student loan tab. Parents too can also find themselves leveraged to an uncomfortable degree after their student graduates.
Qualified people such as financial professionals, guidance and college counselors, and financial aid advisors can help parents navigate the path of saving and paying for college. Below are five rules of thumb for savings and paying for school in the most efficient manner.
1) Start as early as possible
When it comes to planning for college and putting a savings strategy in place, the earlier your family stats the process, the better. Even if it’s a relatively small amount, the sooner you can start saving for college the better to allow time value of money to work its magic
While it’s important to start saving as early as possible, you don’t want to commit to an account before you…
2) Know your options
Educate yourself about college savings options as early as possible. It’s difficult to make the best decision for your family if you aren’t aware of all of your options. There are options involve investing in the stock market, offering higher potential return in exchange for putting your money at risk of loss, while other choices will be true savings vehicles, meaning they cannot face loss. Some choices come with penalties if not used for higher-education expenses, and some will count against your financial aid eligibility as determined by financial aid offices.
It’s certainly important to know what options are out there, but along with products you will need to…
3) Have a strategy
Most people have a bunch of products, but they lack an overall strategy. This is true about the financial planning world in general, and college financial planning is unfortunately no different. You may have heard of 529’s, Coverdell’s and other financial products geared toward saving for college. While there are many products that can help you achieve your goals, it’s important to have a strategy in place before you choose a product or an array of products. First, determine what your goal is and how much risk you are comfortable with. This reflection, along with the knowledge of the risks, benefits, and expenses associated with all of the different products available, will help you come to the right decision for your particular circumstances.
While it’s important to have a savings strategy, you must also have one when it comes to paying for college. You must look into all of the assets you are putting toward college. Once your student is accepted to a college, you must also factor in financial aid that has been awarded and other aid that might be available. You will have to navigate your loan options and other alternatives, such as payment plans that are typically broken down into monthly charges. Once you collect all of this information, you can then determine the best way to pay for college.
It’s good to have an overall strategy when it comes to saving and paying for college, but once you do have your strategy in place you will have to narrow your list of schools to determine what the best fit is for your student. When you are deciding on a school you must…
4) Look beyond the sticker price
It’s natural to hastily cross certain schools off your student’s list when their room, board, and tuition cost $50,000 or more. However, don’t automatically dismiss a school based on its “sticker price.” Other factors that should be considered include what percentages of need-based and merit-based financial aid are provided by schools to offset their cost. Just because you don’t believe you can afford the sticker price, it doesn’t mean that it’s not worth going through the application process to see what sort of financial aid package the school provides. A school that initially seems out of reach may end up being more affordable than you think.
In most cases, to determine the amount of financial aid a school will provide your student you will need to…
5) Complete the FAFSA
In order to determine what financial aid a college will be able to provide your student, a FAFSA (Free Application for Federal Student Aid) must be completed. This federal form can cause significant angst and confusion, and at first look it can be overwhelming. But you need to power through. Don’t fear the FAFSA!
Many people assume they will not be eligible for financial aid, and don’t pursue the FAFSA process. While it does require time to fill out, the FAFSA is worth it so that you have all options available as you tackle paying for school. Students are made eligible for a portion of federal loans just by completing the FAFSA. It also allows schools to determine what need-based financial aid is eligible to your student. Even if your son or daugther isn’t eligible for state and federal grants, he or she may be eligible for other need-based and merit-based grants made available by the school to attract students.
Saving and paying for college can be an overwhelming process, but it is something that parents and students can successfully navigate. This process can be made easier by starting early and enlisting the help of trusted advisors and counselors.
This article was contributed by Blaine Blontz. Blaine is a Registered Representative with Independence Planning Group (IPG), a financial planning firm in Blue Bell, PA. Prior to joining IPG, Blaine was a financial aid counselor at colleges including Millersville University and La Salle University, where he received his MBA in Finance.
Securities products & services offered through Park Avenue Securities LLC (PAS), member FINRA, SIPC. PAS is an indirect, wholly-owned subsidiary of The Guardian Company of America (Guardian), New York, NY. Financial Representatives of Guardian. Independence Planning Group is not an affiliate or subsidiary of PAS or Guardian.
Guardian, its subsidiaries, agents or employees do not give tax or legal advice. You should consult your tax or legal advisor regarding your individual situation.
Guardian does not issue student loans, nor any counseling to attain or pay down student loans.
2014-5097 Exp 4/15