Summer is quickly coming to an end with school just around the corner. It is never too early to plan for college which includes the big question – how to pay?
Did you know that student loan debt is the second largest type of consumer debt (with mortgages being number one)? About one in nine people have a student loan with an approximate total of 1.3 trillion dollars. Knowing these statistics and working with parents and their kids as they prepare to pay for what can seem like a challenging and overwhelming feat drove me to want to write this blog in my series of Educating Kids About Money. In this final addition, I address the different ways to fund a college education, the idea of deciding which school or what kind of education, and whether school now or later.
Please see my other blogs on children and money here:
As I’ve suggested in previous blogs and outlined on my website, there are 5 essential planning steps that can be applied as you help your child in this process. Keep in mind, as with all plans, the earlier you start the better; however, regardless of the timing you need to start! Having a plan can prevent any possible anxiety you and your child may experience just thinking of this subject.
Ways to Fund College Step 1: Assess the situation.
Ask your teenager to describe their goals after high-school. Do they want to go to college, join the military or peace corps, attend a technical school, go on a mission or maybe they are eligible for an internship? This is a discussion that is best to have as soon as possible so proper planning can occur. Of course, keep in mind your child has every right to change their mind, but just starting the process gets you both thinking.
Ways to Fund College Step 2: Develop a plan.
Determine amount needed to meet their goal. Your financial advisor can assist with calculating as well as numerous tools available online. I like the resources available on Savingforcollege.com. Once you know the amount needed, you and your financial advisor can develop a plan. Again, it’s helpful to start this early so if any preparation required can occur – i.e. as a freshman your child can ensure they are taking the courses required to make them competitive for certain scholarships.
Ways to Fund College Step 3: Identify the tools you can use to meet their goal.
These tools include student loans, scholarships or college investments (529 Plan). This is the step that should be started as soon as possible. Meeting with your Financial Advisor can help before your child is out of pre-school. Check out a couple of these websites:
Ways to Fund College Step 4: Implement the tools that best meet your needs.
Most likely it will be a combination of tools available. If you are properly prepared you may be able to keep your loans at a minimum. The most important aspect is to clearly understand how your tools work. Please reach out to your Financial Advisor and School Guidance Counselor for assistance.
Ways to Fund College Step 5: Finalize the plan and review it often to ensure you and your teenage are on track throughout the year.
Once you and your teenage have a plan, review it quarterly or at least semi-annually (end of each semester) to ensure you are on track. This will help with investments as well as if your child needs to meet any application deadlines for scholarships. It will also keep your child enrolled in the best courses.
If you’re unsure as to where to begin, or you would like to create a financial plan including education planning, consider requesting a consultation with me.