ABC’s, 123’s, ACT’s and SAT’s…sending your kid to college is something parents think about as early as their first pregnancy, maybe even before that. It’s more expensive than ever, there are more options to choose from, and you never know if it will last for only 4 years. So how can you prepare for all of this unknown? The questions about saving for college seem limitless, so let’s start with the basics.
How much will it cost?
Prices vary state to state and whether or not your kid goes in-state or out-of-state. While some states like California offer more monetary benefits for going to a state school, places like Pennsylvania have the highest in-state tuition for some of their bigger state schools. The College Board reports that in-state tuition and fees for a 4-year school ranged from $5,060 in Wyoming to $15,650 in New Hampshire. What’s worse is that out-of-state students typically pay more for their education than their in-state classmates and sometimes even more than students at private institutions. The total tuition and fees for out-of-state students at 14 state schools in the 2017-2018 academic year exceeded $40,000. These are numbers you should be considering when starting your savings plan.
How much will you cover?
With tuition costs trending on the rise, it may not be feasible to pay for all of your 2.5 children’s college tuition. What’s reasonable for your family to spend to send your kids to college? If you can start saving sooner rather than later, you’ll see that you can build a good nest egg to get them off to the right start. While you may not be able to cover the full expense, there are a lot of great loan options for both parents and children to ensure your kids get the proper education. In addition, keep in mind that money spent on college can put a dent in money you have set aside for your own retirement.
What are your options?
There are many different loan options for college. The most important thing is to find the loan that is right for you and your family. There FAFSA/PLUS loans, or federal loans, that can be both subsidized and unsubsidized. These loans may have a lower interest rate but may not qualify to pay for their entire tuition. There are also private loans that come at a higher interest rate, but the limit on these loans are more flexible than federal loans. You can also have loans taken out in the student’s name as well as loans in the parent’s. Your student can also apply for grants and scholarships to help pay their way through school. Talk to your financial adviser about what makes the most sense for your financial plan.
Paying for college is a big decision. Having open and honest conversations with your family can help get everyone on the same page with your approach. Don’t be afraid to talk to your kids about the true cost of school, and what their education means to them. Understanding the cost is almost as important as attending. Talk to your adviser today to get you on the right path.