How To Be An Informed Buyer Of a College Education
The cost of a college education is not cheap. There are many factors that will go into how much your family will pay for a college education. Knowing the ground rules of how the game is played will result in the best outcome for your family. Here are the top 11 things to know regarding paying for a college education:
- Sticker Price – most students do not pay full price for a bachelor’s degree. 58% of students receive grants/ scholarships at state institutions and only 11% on students at private colleges pay full price.
- Know the Sources of College Money – the federal government, state governments, colleges themselves and private scholarships are the main sources of money for colleges. Knowing which source is the right avenue for your family to pursue is crucial.
- Private Scholarships – actually, private scholarship are one of the smallest source of money for college. The average award is $4000 and competition for national scholarships is fierce.
- Financial Aid – determine if you will qualify BEFORE applying to colleges. It is critical to know your family’s Expected Family Contribution (EFC) before applying to colleges and before filing out the FASFA.
- Know Your Numbers – starting in your child’s sophomore year, it is critical to start looking at your financial data that may impact financial aid eligibility. Learn what assets and income count and do not count when it comes to financial aid. Pay close attention to parent assets, student assets, all sources of income, 529 accounts, custodial accounts and retirement accounts.
- Grandparent Strategies – grandparent contributions may be reported as untaxed income to your child and greatly hurt your financial aid chances. Learn strategies to avoid reduced financial aid eligibility with strategic grandparent gifting.
- Check 4-year Graduation Rates – nationwide averages consistently show public university 4-year graduation rates hovering around 33% and private schools at 53%. Knowing the chances of your student graduating in 4 years will help you pay less for college.
- Throw a Wider Net – looking at some lesser known schools can yield results that offer generous merit aid for your student. Don’t just assume public, in-state universities will be the cheapest.
- Understand Borrowing Options – nearly 71% of students borrow for college. Understanding the pros and cons of subsidized, unsubsidized, student, parent and private loans can make all the difference.
- Tax Credits – for most parents, the American Opportunity Tax Credit can yield up to a $2500 tax credit in a given year. Know the income limits and what is best for your family ahead of time.
- Divorced Parent Strategies – Understand how the financial aid formulas look at divorced parent situations. Learn how they determine custodial parent, who’s income counts and who’s on the hook for paying for college. It may differ from your custodial agreement or tax filing situation.
Planning financially for college can be a tricky proposition. There are many myths and misconceptions about paying for college. Heather Hale, CFP of Peak College Planning specializes in helping families navigate the college admissions process to find the right college, for the right reasons and at the right price. Contact her today for a free consultation at 615-485-2280 or info@PeakPlanningTN.com