Financial Planning for College

Financial planning and saving for college

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Financial planning to attend college is a goal that demands careful planning. College tuition prices have risen significantly in recent years; which makes it more important than ever to plan in advance for a college education. Most full-time college students qualify for various types of financial aid, which helps pay for college. After graduating college with at least a bachelor’s degree, students can anticipate earning a higher income than they would without a college degree.

Saving for College

Beginning when children are very young, families may choose to save monthly for their children’s future college education expenses. Special savings accounts exist that enable parents to save for their children’s education, including 529 college savings plans and Coverdell education savings accounts. These plans and accounts earn interest in a similar fashion to other savings accounts. However, they are different because contributions and interest are not taxed, which means more money is saved.

College Costs

College costs include more than just tuition and fees. Students also have to pay for books and supplies, room and board, transportation, and personal expenses while they attend college. There is also a significant difference between the sticker price for college that is published on a college website and the price that a student will actually pay for college. The sticker price is higher than the net price, which can also be reduced by applying for scholarships and grants.

Family Contribution

A family’s expected family contribution is the dollar amount that colleges use to decide how much financial aid will be offered to a student. The expected family contribution is calculated using the information supplied on financial aid forms, completed by families. The expected family contribution is just an estimate of what a family can afford, and it’s calculated so the government can use it to make financial aid award decisions.

Managing Costs

Frugality during the college years helps keep college costs down, which helps reduce overall debt. Living at home while attending a nearby college will eliminate the costs for room and board, which can significantly lower overall college costs. Choosing a two-year community college, to start then transferring to a different college, instead of automatically starting at a four-year university is also much less expensive. 

After earning a two-year associate degree, it’s often possible to transfer credits to a four-year college, which will usually save money. It’s also helpful to take as many credits as is manageable each semester to graduate as quickly as possible. Taking summer classes is also advantageous. Working part-time while going to college will help offset some expenses, too.

Financial Aid

Families tend to pay for college using a combination of sources, including savings, financial aid, and income. The Free Application for Federal Student Aid (FAFSA) must be completed and submitted by a family to apply for financial aid. Financial aid includes loans, grants, and scholarships. Some colleges also offer work-study programs to help students pay for tuition. Whenever possible, students should accept grants and scholarships offered, because these funds don’t have to be paid back. Loans must be paid back with interest, although the terms tend to be advantageous for borrowers.

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