08/20/2021

Financial Planning for College

Attending college offers many benefits when it comes to having a higher-income job and being exposed to new experiences. However, the climbing costs of college have some students and their families choosing to forgo higher education. Our blog helps outline the expenses to plan for and financial planning guide for parents and students so that attending college is attainable. Click the link to learn more!

How to Get Started on Financial Planning for College

Most respondents to Princeton Review’s 2021 College Hopes & Worries survey believed that attending college offered benefits such as a potentially better job with higher income and exposure to new ideas. However, especially after the economic impact of the pandemic, financial planning for college is becoming more critical than ever.

 

The survey reported that a whopping 98% of college-bound students and their families said financial aid would be necessary to finance college. Other reports have found that some students are changing their plans and choosing not to attend college because of the high costs.

 

Proper financial planning can help alleviate college-related financial concerns such as affordability and debt burdens. Read through our tips below to learn more.

Expenses to plan for

The specific amounts and types of college-related expenses may vary widely based on your unique situation. This general checklist provides a useful starting point as you begin planning and budgeting.

  • Tuition and fees: what is the “sticker price” of attending your chosen school, and what will not be covered by financial aid or scholarships that you will have to pay out-of-pocket?
  • Housing and food: will you live in school housing, or will you need to find an apartment or house? Does the school have on-campus cafeterias, or will you cook on your own?
  • Books and supplies: what materials do you need to purchase, and what free resources are available to alleviate these expenses?
  • Personal expenses: don’t forget about clothes, toiletries, and other personal items!
  • Transportation: if you need to travel for any reason, will you need a car, public transportation pass, or rideshare account?
  • Other expenses: budgeting for leisure items and other expenses can help you control and cut costs where needed.
  • Emergency fund: emergency savings can provide a much-needed cushion if you need to pay for something that isn’t in your budget, such as a medical or insurance emergency.

This list may look like a lot to plan for, but don’t panic! Our tips for saving, budgeting, and financial planning for college can help no matter your situation.

Parents’ guide to financial planning for college

If you are a parent or guardian planning to send kids to college, these tips are for you.

Start early and save regularly

Develop a plan and budget early to reduce stress, save more, and lower the amount you may have to borrow. Unfortunately, many external factors – increases in student loan interest rates, spikes in the cost of living or tuition – are out of your control. Starting early can make a significant difference, even if you’re only saving a little bit at a time.

 

Try creating a budget specifically for paying for college and set aside a small amount each month or from each paycheck. Automatic deductions can be useful because you don’t have to remember to save on your own. Look for online tools and calculators to help plan your savings goals.

Open investment accounts

There are many advantages to opening savings and investment accounts for your child to use in the future for education expenses. Often, these include tax advantages and safe, reliable interest earnings. Here are a few account types to consider:

  • 529 College Savings Account: between the tax-deferred earnings and tax-free distributions on education expenses, a 529 plan is an excellent investment option for college savings.
  • Education Savings Account: like a regular savings account, you can earn interest on whatever you deposit in an ESA. Unlike a regular savings account, neither your contributions nor your interest will be taxed.
  • Savings Bonds: this safe investment option works like a loan to the government. After up to thirty years, you can cash in the bond – plus interest!
  • Roth IRA: although usually associated with retirement savings, you are allowed to make tax-free withdrawals from a Roth IRA for higher education and other qualifying purposes.
  • Discretionary or custodial savings accounts: if you want to retain control over the use and withdrawal of funds from accounts you’re funding for your child, these are great options.

If you’re not sure which accounts are the best options for you, reach out to our experts anytime for advice and guidance.

Invest in your child

What are your child’s talents and passions? Investing in their extracurricular activities, such as sports, arts, or even after-school jobs and volunteer work, is not just enriching for their development. It also opens opportunities for scholarships and other potential forms of merit aid! Colleges love to see well-rounded students who made good use of their after-school hours.

 

You can also “invest” in your child in a different way: by teaching them healthy financial habits and how to budget from an early age. Help them learn to save, invest, and spend wisely early on and involve them in financial planning for college. Learn more in our FA$Ttrack course on having family conversations about money.

Research cost variations

The Princeton Review survey also found that affordability was among the top factors in choosing between college options. College costs can vary widely based on factors such as the college type, location, availability of financial support, and more.

 

For example, a community college, public college, and private college in the same area may all have different costs. A private college in a major city will likely be more expensive than a private college in a more remote area. A large research university may have a higher “sticker price” than a smaller private college but could offer more financial support for overall lower costs.

 

Keep these variables in mind as you research options. A little bit of research and preparation can go a long way in giving you choices and reducing your college costs.

Student’s guide to financial planning for college

If you are a student or financially independent adult planning for a college or university experience, these tips are for you.

Know your financial aid requirements and guidelines

Different types of financial aid have different requirements and guidelines. The most critical first step is filling out your Free Application for Federal Student Aid on time to see if you qualify for support. The majority of full-time college students typically receive at least some form of financial aid, which helps reduce the “sticker price” to a more manageable level.

 

Ensure you check with your school to learn more about financial aid and the different options available to help you achieve your educational goals.

Consider ways to earn money or win financial support

There are many ways you can earn or win financial support as a student. Here are just a few:

  • Research scholarships: although financial aid may only be available to students and families in a certain income bracket, many scholarships invite any student to apply. Consider applying to merit opportunities, entering art, essay, or other contests, being a student-athlete, or finding other scholarship options.
  • Find a job: some schools offer federal work-study programs for students with financial needs. Others provide free housing for students who work as resident advisors or other on-campus employees. If your school doesn’t offer these options, you can also look for part-time employment in the surrounding community.
  • Ask your employer: if you are already employed and interested in going back to school, your employer may offer financial support. Encouraging employee education and professional development is often advantageous for companies, so check for any education-related perks you can take advantage of.

Compare your loan options and talk to lenders

It’s necessary to reach out to various financial institutions and lenders to compare your loan options. Different products have different terms, rates, limits, and more. Student loans tend to have the most flexible and desirable terms as well as other conditional terms, such as student loan forgiveness if you meet particular terms in qualifying fields.

 

It may seem daunting to borrow the amounts necessary for funding your education, but remember: this is an investment in your future. If you make sure to be smart about researching and choosing loans, there is nothing wrong with needing to borrow some money.

Remember: your time and mental health are valuable!

Supporting yourself financially through college is incredibly admirable, and a college education can be valuable. However, it’s critical to find the right balance between investing in your education and future, and prioritizing your time and mental health. The most important thing you can invest in is your well-being!

 

For example, if working part-time jobs cuts into your studying time or causes you to neglect sleeping or eating, consider ways to rebalance your schedule. If the prospect of paying back a loan gives you too much stress, prioritize finding scholarships instead. You could also take a gap year to work, build up your savings, or look for alternate paths to your goals.

 

Not everyone’s path looks the same, and that’s a good thing. Here at Liberty Bay, we want to support you in finding the right path for you, your child, and your family. If you want to learn more about how to get started on financial planning for college, let us know – we’d love to help!