John J. Diak, CFP®
It’s Never Too Late for College Financial Planning
The rising cost of college tuition is causing rising concerns among parents, whether their children are newborns or graduating seniors. As paying for college has become increasingly challenging for families, it has become an even bigger consideration in long and short-term financial planning. Many parents of teens simply did not save enough because costs outpaced their plan.
Unfortunately, recent statistics show that the average student loan debt for college graduates in the United States is more than $30,000, setting them up with a significant financial burden right from the start of their adult lives. However, with careful planning and disciplined saving, it is possible for you to lessen or even eliminate that burden for your child.
Let’s take a look at how parents with teenagers and college-aged children can determine the various options available to help them pay for their child’s schooling.
Paying for College Up Against the Deadline
If you have not saved for your child’s college education or you have not saved enough to cover tuition and expenses by the time they are ready to enroll, you still have options for helping to pay for school. While starting as early as possible is ideal, it is also never too late to search for other resources that will help your child avoid borrowing money unnecessarily.
Start a College Savings Fund
Even if you only have a few years before high school graduation or your child has already graduated, you can still take advantage of the last-minute tax savings of one of the following savings funds. The 529 Plan has no age limit and the age limit for ESA is 30, so start putting money aside now and get whatever tax-free benefits you can. If your child delays college to work full-time and save for tuition, they can also get the tax advantages of a 529 Plan for their own education savings.
Exempt College Coursework
Many students are able to exempt core coursework by taking advanced classes in high school or testing out. Advanced Placement (AP) classes give your child an opportunity to take a college-level class and test out of that class requirement. Some high schools offer dual enrollment with local community colleges for no cost or low-cost tuition. And some colleges allow students to test out of lower-level courses to advance more quickly. There is also the option of studying independently for a particular class and taking a CLEP or DSST exam. Before you invest time into any of these options, however, check with your child’s intended college or university to be sure they will accept the credits.
Apply for Scholarships and Grants
Do your research and find scholarships for which your child would be eligible and encourage your child to set themselves up for success through their studies, dedication to a sport or activity, hard work, and contributing to their community. Qualifications could be based on athletics, academic merit, membership in an underrepresented minority group, volunteerism, or extracurricular activities. Your employer may also offer scholarships for the children of employees; and you should also look for scholarships given by the social, business, community, civic, or fraternal organizations in which you are involved. Other options may include essay competitions or grants to study particular subjects. There are many scholarships each year that go unclaimed, so it’s to your benefit to spend time searching and having your child apply for as many as possible.
Apply for Financial Aid
Financial aid for college helps students and their families cover education and related expenses. Even if you have applied for outside scholarships or grants, submitting financial aid paperwork will identify available scholarships, grants, student employment or work-study, or loans. Some of the funding opportunities are need-based, some are merit-based, and loans are available to all eligible students. The first step is to complete a free application for Federal Student Aid (FAFSA) by the deadline, which you can find through the school’s financial aid office.
Financial planning for college is challenging. When you are faced with the imminent cost of tuition, room and board, books, travel, and other expenses, it can be intimidating. But with savvy planning and dedication, the challenge of paying for higher education when up against a deadline is not insurmountable and there are many helpful options available.
A financial advisor can help you decide which college savings fund option is best for your family’s needs and financial circumstances.
You can read our article on It’s Never Too Early for College Financial Planning, to find out how parents of newborns can ease their fears and find the best options for college funding for young children.
John J. Diak, CFP® is the Principal & Client Wealth Manager at Oatley & Diak, LLC in Parker, Colorado. He assists clients through many difficult lifestyle changes such as business downturns, retirement planning, divorce, the death of a spouse, and family estate issues among others. Oatley & Diak, LLC is a family-run registered investment advisory (RIA) firm that provides clients with investment management and financial planning services in a hands-on, intimate environment. Learn more about them at oatleydiak.com.
Content in this material is for general information only and are not intended to provide specific advice or recommendations for any individual.
Prior to investing in a 529 Plan, investors should consider whether the investor's or designated beneficiary's home state offers any state tax or other state benefits such as financial aid, scholarship funds, and protection from creditors that are only available for investments in such state's qualified tuition program. Withdrawals used for qualified expenses are federally tax-free. Tax treatment at the state level may vary. Please consult with your tax advisor before investing.
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