YOUR FINANCIAL FUTURE / College Savings Tips

College savings is a topic that frequently comes up in my client meetings. Young parents and grandparents often inquire about the most effective ways to save for this major expense. I am familiar with the benefits of savings options such as 529 college savings and prepaid tuition plans so I was wanted to see what I could learn at the recent national Financial Planning Association conference in Boston.

Lynn O’Shaughnessy of collegesolutions.com presented “Five Simple Yet Effective Ways to Help Your Clients Cut Their College Costs”. One of the most important points she made was that 83% of colleges today provide financial aid. Lynn told us of a school with an annual cost of $40,000 for tuition, room & board; it was discounted to $21,300 for one of her clients. Other than the top tier of schools that don’t need to discount, colleges are looking to fulfill their enrollment goals.  She said schools are so much in need to meet their enrollment goals, that some even try to convince students to change their mind even after they have elected another school. What a difference from my enrollment period in the 1970’s when we baby boomers were competing to get into college!

We often use college calculators such as the one from www.savingfor college.com to estimate a child’s future total expense for a higher education. When using a college calculator, you should to input a discounted number, say 30% to 40% less than the stated annual cost for tuition, food & board & expenses. The number will certainly be less frightening!

Regarding financial aid, parents need to obtain their “expected family contribution” or EFC. Lynn said it is good to obtain this as early as middle school. There is a “net price calculator” in addition to the EFC calculator to estimate financial aid. Google the name of a school and the name of the calculator you will be using; the college will ask questions that pertain to your tax return so have that handy. It will indicate if your child qualifies for a federal or state grant and will show you the net price for attendance. She recommends you do this before applying to a school. That makes good sense to me!

Note, some schools include home equity in their calculations, others don’t. Interestingly, Harvard University does not. It is good to ask that question as homes in the Keys and Boston are so much more expensive than other areas of the country.

Other points:

Try for a merit scholarship,

research the generosity of schools at www.bigfuture.collegeboard.org,

check the 4 year graduation rates of schools on Google,

for every $10,000 in savings, a students’ chance of financial aid will drop by $548, and

look at colleges versus universities for cost savings.

Last but not least, the most expensive schools are on the coasts and they tend to be stingy so look at those in other parts of the country. My former assistant lives in New Hampshire; she has a brilliant daughter that could have likely attended the college of her choice. Her daughter received significant financial assistance at a very good college in Minnesota. The college was looking for geographical diversity and a student from New England gave them that!

Roxanne E. Fleszar, CFP, ChFC is President of Financial Resources Management Corp, a registered investment advisory firm with offices in Key West, Boston and Naples.

 

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