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?
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:
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
- 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.
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.
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.