Magellan Financial Advisors

Asset & Wealth Management in Allentown, Pa

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 610-437-5650

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How to Afford College and Avoid Debt

Nov 01 2016

As a parent, you know that education is an important component of your child’s success in his or her career. Today, more employers are expecting their employees to have a college degree before they will even consider hiring a prospective job candidate. This is also the case when it comes time for promotions, as employers take into account the employee’s level of education in addition to their work performance.

Individuals with a college degree also stand to receive a entry-level salary that is usually much higher than a person who graduated from high school without getting an advanced education. College students also benefit from being able to land internships, which helps to secure their future career.

Your Child’s College Experience

When your child is in college, he or she gets to learn more about other cultures and meet new people. Because these are the years of becoming an adult, it is the time where they discover both themselves and their interests, so that they can find the perfect career.
But, what about saving for and affording college?

College Savings plans in Allentown, Pa

College Affordability

With the increase in employer’s demand for a college degree comes an increase in price too. In fact, for the years 2015 – 2016, the average tuition at private colleges was about $32,405 for the school year, according to the College Board. Public colleges were at $9,410 and public universities with out-of-state residents were at around $23,893.
College fees like this can really put you in debt. Based on a report from Student Loan Hero, student loan debts are up to $1.3 trillion for Americans with over 43 million people borrowing. Just one average 2016 student has a student debt of around $37,172 which is a 6 percent increase from last year.

College Savings Plans

With this information, it’s time for you as a parent to begin saving for your child’s college expenses. At Magellan Financial, we have various different funding options including:

529 Plans

This is a flexible and low maintenance potential tax deferred savings plan that anyone can qualify for. Plus, you can use your 529 plan account balances to fund any U.S. post-secondary education institution or certain schools abroad for expenses that are qualified. The expenses that qualify include:

  • Room and board
  • Tuition
  • Equipment
  • Books
  • Supplies (relevant to attendance or enrollment of your eligible school)

Whoever holds the account has control of the assets and is able to designate a new beneficiary at any time with no penalties.

UTMA Accounts

This refers to Uniform Transfers to Minors Act and are forms of custodial accounts that an adult sets up on behalf of a minor. The assets and money (stocks, bonds, mutual funds, certificates of deposits) are the various types of these accounts and become under the control of the beneficiary when your child reaches a certain age.

Coverdell Education Savings Accounts (ESA)

This is a custodial or trust account that is designed with the intent to pay the designated beneficiary’s education expenses. You are able to make a yearly contribution (nondeductible) to a specific investment trust account. This account can potentially grow without having to pay in federal income taxes and any withdrawals you take from the account could be totally tax-free as long as if the money is used for qualifying education fees before you reach 30 years of age.

A Traditional Investment Account

This type of account is generally for people closing in on retirement. Your liabilities and anticipated income is plotted out each year to help you prepare for your future. Even though it’s not intended for college savings, you can use it as such.

Financial Aid Options

There are four primary financial aid sources which include:

1. Federal Aid

This is grants, work study funds and loans. You have to file a Free Application for Federal Student Aid (FAFSA) to see if you qualify.

2. State Aid

This can be in the form of work-study funds, scholarships, grants, tuition assistance and state loans.

3. Institutional Aid

Universities and colleges usually offer grants, work-study programs and scholarships.
It’s important that you speak with your college’s financial aid office to decide which type of aid they offer and accept.

4. Private Aid

This is where scholarships and loans are given out by cultural organizations, religious organizations, corporations, service and professional organizations and more. A great resource for this type of private aid is your child’s guidance counselor.

In Conclusion

Going to college can get very costly and can leave you child in a world of student loan debt. It’s important that you take the time to thoroughly explore all the college funding options to decide which option is best for you and your child.

For more information about saving for and affording college, please leave a comment below or contact Magellan Financial today!
Summary
How to Afford College and Avoid Student Debt
Article Name
How to Afford College and Avoid Student Debt
Description
Tips on how to afford college and avoid debt including college savings plans (529 Plans), financial aid, and investment strategies.
Author
Jonathan Soden
Publisher Name
Magellan Financial Inc
Publisher Logo
Magellan Financial Inc

Categorized: Educational Planning Resources, Family & Finances
Tagged: 529 College Savings Plan, Affordable College Savings, ESA, FAFSA, Financial Aid, saving for college, Student Debt, UTMA Accounts

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MAGELLAN FINANCIAL, INC.

1605 N Cedar Crest Blvd #111
Allentown, PA 18104 USA

 610-437-5650

Toll Free:  1-888-437-5650
Fax:  610-437-5654
Email:  Rob.Cahill@WFAFiNet.com
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Investment products and services are offered through Wells Fargo Advisors Financial Network, LLC (WFAFN). Wells Fargo Advisors is a trade name used by Wells Fargo Clearing Services, LLC (WFCS) and Wells Fargo Advisors Financial Network, LLC, Members SIPC, separate registered broker-dealers and non-bank affliates of Wells Fargo & Company. WellsTrade brokerage accounts are offered through WFCS.

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