How to financially prepare for college
You want to invest in your child’s future. Often, that means ensuring they go to college so they can pursue a career they desire. If the thought of paying for school is overwhelming, you are not alone.
While 86% of families expect their child to go to college, only 39% have made a plan to pay for it, according to Sallie Mae’s 2017 national report How America Pays For College
The good news is there are plenty of ways to tackle what may be your greatest investment. Also, this financial burden doesn’t have to be yours to bear entirely. For the first time in a decade, scholarships and grants cover the largest share of college costs—at 35%, the Sallie Mae study reports, followed by parent income and savings at 23%, student borrowing at 19%, student income and savings at 11% and parent borrowing at 8%.
Here are some tips for both parents and students to help you financially prepare for college.
- Open a 529 college savings account—as early as possible. This is a great vehicle for families to save and invest for college with tax-deferred earnings and tax-free distributions on education expenses.
- Save through automation. Have funds automatically withdrawn from your checking account or paycheck into a college savings fund. If you don’t see it, you won’t miss it. Your bank can help you get set up. This goes for the student too. Setting aside extra savings from part-time jobs or paid summer internships can help cover some college costs.
- Research the costs of each school you are considering. Compare tuition and expenses at community colleges, public universities, and private colleges and universities. Most schools have a net price calculator on their website to help you figure out what you’ll likely pay based on your living preferences, and after taking grants and scholarship aid into account.
- Get the most out of financial aid and grants. Complete the FAFSA (Free Application for Federal Student Aid) as soon as it’s available to you. This form is your entry to receiving financial aid from the federal government. You’ll have to fill out tax and income information to help determine whether you qualify for scholarships, grants, and federal loans. Some financial aid is awarded on a first come, first served basis, so submit your FAFSA form as soon as possible after October 1 of each year to improve your chances of receiving the maximum amount of financial aid.
- Be vigilant about researching and applying for scholarships. Many local and national organizations, businesses, schools and local civic and religious groups offer them. Search online and be sure to ask your high school guidance counselor for help too.
- Create a college budget. Budgeting reduces overspending—and stress—while nurturing healthy financial habits that last a lifetime. You and your student should have an open conversation about who is paying for what and all anticipated expenses.
- Consider a credit card that earns cash rewards for purchases. A credit card can be a great tool to help your student track spending, build credit, spend responsibly and avoid interest and fees. Plus, getting cash back on purchases you’d already be making is always helpful. Be sure to stress the importance of paying the monthly bill in full.
- Earn additional income through work-study programs or part-time jobs on or near campus.
- Take out loans as needed. Once you’ve exhausted financial aid, grants, federal loans, scholarships, and college savings income, consider private loans to cover the difference. Your local bank can be a great lending resource.
Keep in mind, college costs rise every year so the more you and your child can tuck away, the better prepared you’ll be. Contact us for savings tools, as well as college lending solutions.