Thinking about financial planning for college? If so, great job on being proactive! No matter how close you or your child is from graduating high school, it’s smart to know your financial situation before you (or your child) accumulates unwanted debt after graduation.
Here, we take you back to the basics of education planning.
Step 1: Establish Where You Are and Where You Want to Be
As we like to say, you wouldn’t build a house without a blueprint, so why would you build a future without planning out the steps to get there? You need to know what your goals are.
Here are a few questions to help you get started:
- Are you planning to attend college yourself, or is this for your current or future children? In other words, if you put money into a college savings account now, how many years can it compound?
- What is your current financial state? Do you have debt? Is there room in your budget to contribute to an education fund?
- What college are you hoping to afford? Are you set on a specific in-state school, or determined to get a private education? Are you open to all options based on how the financials play out?
- Do you plan to rely on scholarships to offset cost? Though this may seem too far in the future to predict, but it’s good to think about now.
Step 2: Start With Free Research
Once you’ve started thinking about those questions, begin researching online to figure out your answers and get a sense of your payment options.
Find Free Advisor Resources
Some firms or organizations offer free help and advice. One organization, for instance, called the College Financial Aid Advisors (CFAA) hosts a weekly Twitter chat using the hashtag #CollegeCash.
The U.S. government also has a website that explains how financial aid works, and the website for the ACT program includes a college cost-comparison worksheet.
Look into a College Savings Plan
Remember that financial aid typically needs to be paid back (and it accrues interest that you also pay). A college savings plan, on the other hand, also known as a 529 plan, helps you pay as much as possible up front.
In short, 529 plans are specifically used for education, so be sure to check which schools you can use the account for. Also, compare fees and commissions; remember, every dollar that goes into a fee doesn’t go towards college.
Step 3: Meet With a Financial Advisor
If you begin feeling overwhelmed, speak with someone who knows the entire financial planning process inside out. In addition to understanding your personal finances, advisors should know about all the terminology and nuances of college tuition, federal aid, and personal finance. This includes FAFSA, your EFC, tax strategies, and merit aid, to name a few.
Your advisor should also have opinions on which 529 plans are best suited for you or your child.
Need Help with College Planning?
At Focus Financial, we’ll help you and/or your loved ones plan for a bright, debt free future. For a comprehensive look at education planning, find an advisor near you today!
