College tuition is rising faster than the rate of inflation according to many sources. The National Center for Education estimates that 20.2 million students will attend college this year. It’s widely believed that college graduates on average make more than those with just a high school diploma.
So how will the average family cover the cost of college for their children by the time they reach the end of high school?
Careful and smart planning is the simple answer, but with an ever-changing job market, the rising cost of living and the unpredictable stock market, it may be increasingly difficult to save for many families.
Here are five steps to consider to make college costs easier on you and your family:
1.) 529 Plan: While it’s ideal to begin funding a 529 Plan at the birth of a child, it’s certainly not too late to begin a 529 Plan even into the teenage years. Although the money saved will be less, any amount will help cover college costs. A 529 Plan is an account that provides tax benefits and allows money to grow much like an IRA or 401k account by investing contributions in mutual funds. Your financial professional can assist with setting up a 529 Plan and selecting the right state as well as risk level appropriate for your needs. Download this helpful guide to navigating your 529 Plan.
2.) College Selection: Plenty of schools offer a quality education at a reasonable cost. According to a U.S. News survey, the cost of tuition and fees averages just over $50,000 for the ten priciest schools, while the least pricey ten average just under $10,000 for the current school year. So affordable education is very much a reality and it’s not necessary to go high cost if you can’t afford it. It may even be an option to choose a college that is near home to avoid the costs of room and board.
3.) Scholarships and Grants: Scholarships are available to those who have accomplishments such as a project, good grades or volunteer work. Grants may be available from the state or federal government and sometimes from colleges. Applying for various scholarships and grants can cover a portion of college out-of-pocket costs and researching these can uncover a variety of opportunities with a low application rate, increasing your chances of being awarded the money.
4.) FAFSA (Free Application for Federal Student Aid): Filling out this form is the first step in the financial aid process. Federal Student Aid is responsible for managing student financial assistance programs that provide grants, work-study and loan amounts for students attending college. There are around 22 million FAFSA submissions every year and over $150 billion is paid out each year to assist students with college costs.
5.) Work-study or Part-time Work: The Federal Work Study program provides funds for part-time employment to help students finance the cost of their education. These jobs, which can include math or reading tutoring, often require the school or employer to pay 50 percent of the wages. Many colleges have countless opportunities for students to work on the campus part-time during the school year. Students can also take advantage of the summer months and work full-time to save for the school year. These choices can significantly help cover a portion of tuition or room and board.
Finally, educate your children on the value of money and the importance of saving. Delegating a small portion of the financial responsibility for college isn’t punishment. It not only will teach financial responsibility but will encourage students to value their education more if they are contributing and will also build experience through work. Plus it’s good preparation for that first job out of college and the added responsibilities that go along with it.
For more information on developing a customized long-term plan that prepares for your future college needs, including a 529 Plan, contact Bayntree Wealth Advisors at info@bayntree.com or schedule an appointment with us today!
Bayntree Wealth Advisors, located in Phoenix and Scottsdale, Arizona, provides comprehensive financial planning and wealth management. The Bayntree team specializes in all aspects of financial health, including retirement planning, risk management, investment advice, tax strategies, estate planning and insurance.
Bayntree does not provide specific legal or tax advice. Please consult with your tax advisor or legal professional for guidance with your individual situation.
