By Cynthia Rivera, J.D.
Surely, funding a tax advantaged 529 plan early in a child’s life is among the most efficient methods to save for college. What if you realize, as your child inches closer to high school graduation, that the funds you diligently invested may not be enough to cover your child’s college education?
With the steep cost of today’s higher education, having insufficient funds to pay for college expenses is hardly an uncommon situation. According to a recent College Board report, the average cost of tuition at a private college was $34,740 for the 2017-2018 school year. At public universities, the cost for in-state students was $9,970 and for out-of-state students $25,620. Add to this the cost of room and board, books and other living expenses and the price tag per year can send most parents’ pulses racing.
Many people see their retirement plan as a place to dip into to meet the rising costs of college education. However, this strategy is often a mistake because you could diminish the amount of funds you need to meet your own retirement expenses. Your child’s financial future could be encumbered by your lack of financial independence as he or she may have to pay for your needs during your retirement. Your financial security could be further affected by any potential tax consequences and penalties attached to an early withdrawal from your retirement account.
It is important to note that what you can pay for college should be viewed as the amount you can afford without taking money out of your retirement plan. You and your child will benefit from your financial independence during your retirement years.
Following are some tips that will provide you with a roadmap to a successful college financial strategy.
Meet with a Financial Aid Counselor during your College Tour.
While touring the school’s gym facilities, learning about its challenging academic programs, and listening to students describe their superb dining choices can be an exhilarating experience for your family, you need to keep in mind that college is an investment. As such, cost should be part of the conversation.
So, plan your campus visits early and make an appointment to meet with a financial aid counselor. Including the financial aid office in your college visit will provide you with the opportunity to ask about the types of financial aid they offer and the requirements for need-based and merit-based aid. You may also want to ask about any tuition payment plans offered. This would allow you to start paying for college bills in monthly installments during the academic year.
If possible, talk with current students on campus about what college life costs: food, transportation, extracurricular activities and entertainment. There are always unexpected costs that come up.
Discuss Advanced Placement and other college credit programs with the Admissions Office.
In addition, contact the Admissions Office and ask about whether the college grants course credit for passing Advanced Placement (AP) exams. Some colleges do not grant any credit, while others will give the student credit depending on the score. Enrolling in AP or International Baccalaureate courses (which are more rigorous than traditional high school classes) could allow your child to graduate early from college and save a semester or more of tuition money.
If you’re considering a local college, explore the possibility of dual enrollment during the high school years. This could allow your child to earn both college and high school credit and offset the overall cost of college tuition. You may have to pay a fee for some of these courses, but it may still be less than what you would pay in college.
Rules regarding high school credits can vary by college, and in some cases, by department, so make sure that you ask questions during your campus tour.
This article is the first in a series on College and Family Finances. Next, we will discuss the Free Application for Federal Student Aid (FAFSA) and strategies for making the process for completing the FAFSA less daunting. We will also discuss approaches you may take if the financial aid offer you received is less than you had expected.
If you want to share any experiences or recommendations regarding paying for college that have worked (or have not worked) or if you are interested in a particular topic, please contact me at email@example.com. We want to hear from you.