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Preparing for College

A college education continues to be one of the most meaningful investments you can make, whether it is for the future of your child, grandchild or yourself. College enriches the lives of students, exposing them to new ideas, broader thinking, cultural awareness, and the potential to earn more in life. A college degree is a symbol of all the hard work that went into getting to the moment of walking across the graduation stage.

While the benefits of a college education are vast, the costs of tuition and other associated expenses make planning ahead a necessity. If you are preparing to save for college, there are several items to first address, including:

  • How much are you anticipating to pay for a college education?
  • If you are saving for college for your children or grandchildren, how much are you willing to contribute towards their educations?
  • How will you develop an effective savings strategy without dipping into your other financial goals, such as retirement?

These items are crucial to consider with college costs on the rise. According to The College Board’s “Trends in College Pricing,” published in-state tuition and fees at public four-year institutions increased at an average rate of 3.5% per year beyond inflation between 2006-2007 and 2016-2017.1 Below are the average estimated full-time undergraduate budgets (including tuition and fees, room and board, books and supplies, transportation, and other expenses) for 2016-2017 at four different types of institutions:

COLLEGE INSTITUTION

TOTAL

Public Two-Year In-District Commuter

$17,000

Public Four-Year In-State On-Campus

$24,610

Public Four-Year Out-of-State On-Campus

$39,890

Private Nonprofit Four-Year On-Campus

$49,320

Source: The College Board. “Trends in College Pricing.” Annual Survey of Colleges, 2016.

Getting Started

Having a sound college savings strategy is critical to being able to realistically plan for and afford a college education. There are essentially three main routes to support the cost of a college education:

1) Grants and/or Scholarships

While grants and scholarships are an incredibly helpful source of funding, depending on either option can be unreliable. Grants are needs-based funding vehicles that can be unpredictable and exclude many middle-income families. Scholarships can be provided on both a needs and merit basis, yet it can be difficult to predict whether or not the college-bound individual will be eligible for future offerings.

2) Loans
Loan programs are offered by banks, civic organizations, colleges, and federal and state governments. While loans are a valuable option that provide millions with the opportunity to attend college, they also come at a significant cost. The loan offered is limited by the family or student’s ability to repay and often saddle the student with a long-term financial burden. In 2015, seven in ten graduating seniors from public and private nonprofit colleges had student loans, with an average debt of $30,100.2

3) Family resources

Family resources can include personal savings or investments by the student, parents or other family members. The best strategy to save for college involves getting started as soon as possible. There are several college savings plan options that are available to choose from, with the best option for you depending upon your specific financial situation and goals. Some of the most common options include 529 plans, Coverdell ESAs (Education Savings Accounts), UGMA/UTGA (Uniform Gift to Minors Act or Uniform Transfer to Minors Act) accounts, Traditional or Roth IRAs, and more.

How we can help

College funding options are complex topics that can be confusing to sift through on your own. A financial advisor can help walk you through your options and keep you on track financially through college graduation. Click here to find a financial advisor near you.

Additional resources

There are numerous resources available that can help you discover more information on private and public college tuition, financial aid options, scholarships and college planning calculators. Visit the websites below for more details:

www.finaid.org
www.savingforcollege.com
www.collegeboard.com
www.irs.gov

1The College Board. “Trends in College Pricing.” Annual Survey of Colleges. Published October 2016.
2The Institute for College Access & Success. “Student Debt and the Class of 2015.” 11th Annual Report. Published October 2016.

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