| |
According to The College Board,
average annual costs for tuition,
fees, room and board range from
$14,333 for in-state public universities to
$34,132 for private universities. With college
costs increasing six percent per year, in ten
years these numbers will range from $25,668
to $61,125.
Despite the costs, financing a college education
may be more possible than you think.
Saving early, learning all you can about
financial aid and creating a financial plan can
increase your child’s options, save thousands
of dollars in interest and minimize debt.
Save early
You don’t want your child to procrastinate,
so neither should you. “The most
important thing a person has is time,” says
Shelley Moffatt, AAMS, financial advisor
with Edward Jones.
“Every year you put
off, you lose the
power of compounding.”
To illustrate compounding,
saving
$200 per month for 18
years with an eight
percent return will
yield over $96,600. If
you save for just five
years, your yield
drops nearly $82,000 to $14,800.
Perhaps the best savings vehicle for college
is a 529 plan. A 529 savings plan grows
tax-free and if you contribute to Wisconsin’s
529 plan (called EdVest), you can deduct up
to $3,000 per beneficiary on your state
income tax return.
Consider tax benefits, investment
options, fees and expenses and plan support
when choosing a 529 plan. As your child gets
closer to college, move to more
|
|
conservative
assets. “Asset allocation is very important,”
Moffett says. “Switch to more cash the closer
you get to needing the money.”
Complete the FAFSA
The first step to obtain financial aid is to complete the Free Application for Federal
Student Aid (FAFSA). The FAFSA form is
available after January 1 for the upcoming
school year and should be completed as early
as possible.
FAFSA evaluates your income, assets and
demographics to determine your expected
family contribution (EFC). Say your EFC is
$5,000 and a university’s cost of attendance
(COA) is $15,000, you then are eligible for
up to $10,000 in financial aid.
If you are not satisfied
with your financial
aid package, contact
the university’s
financial aid office.
“We view financing a
college education as a
collaborative effort
between the school,
parent and student,”
says Kari Gribble,
director of financial
aid at Edgewood
College. “We can collaboratively work to
identify additional funding options and find
one that would work.”
You should contact
the financial aid
offices if there are
unusual circumstances,
such as job
loss, high medical bills
or divorce. The financial
aid office will then
re-evaluate your aid
package.
Michelle Curtis,
associate director of
Student Financial
Services at UW-Madison, says she is seeing
an increase in unusual circumstances. “It
never hurts families to contact the school’s
financial aid office and explain the circumstances
and get a professional opinion.”
|
|
Government-issued, low-cost student
loans, such as the Stafford loan, provide
flexibility and financing. PLUS loans are
available to parents and are federally funded.
You should be cautious of private loans
which can carry variable rates and less
advantageous terms. “We encourage families
to exhaust all federal, state and institutional
aid before going to private loans,”
says Curtis. “Private loans are really buyer
beware.”
Other help
The best type of aid is scholarships and
grants, which is free money. Scholarships
are generally awarded based on merit, while
grants are generally distributed based on
financial need.
Parents and students should familiarize
themselves with scholarships early in the
child’s high-school career. Check with your
child’s high-school guidance office and on
the Internet to locate scholarships. Also
check with local businesses and civic
groups.
Do not disregard a scholarship because
it’s small, and put time into a quality essay
and application. “Spend time on a good
essay,” recommends Curtis. “If it nets you
just $100, it paid off.”
Encourage your child to enroll in
advance placement (AP) and foreign language
courses while in high school.
Successful completion earns college credits
and shaves a semester or two off of college.
Rick Loerke is a Madison-area freelance
writer and a personal finance guru. He can
be reached at rloerke@hotmail.com
|
|
