SETTING YOUR PATH TOWARDS FINANCIAL SECURITY
There’s no doubt about it: a college education is expensive. With the costs increasing every year, it seems like it is harder and harder to fund education, but there is a way to do it without sacrificing your retirement. Our college planning guide and our dedicated staff are devoted to providing education planning to families to determine how best to pay for college.
It may be helpful to familiarize yourself with financial aid. There are typically three types of financial aid a student can receive to offset the cost of education:
- Grants and Scholarships are awards based on financial need or scholastic merit that do not have to be repaid. These can be awarded through the student’s high school, college, or local, state, and federal government. They may be awarded upon acceptance to college or may require the student to research and apply for different scholarships and grants.
- Loans are awarded based on financial need that must be repaid with interest. Different types can be owned by the student or the parent. Students or parents can receive federal loans based on financial need or apply for private loans.
- Work-Study provides part-time jobs to students who demonstrate financial need. The money can be used to offset tuition or provide earnings to help with a student’s cost of living. When students arrive at their school, they are responsible for seeking employment on campus. Depending on what their school offers, they may work at the library, in an office, or other facilities on campus.
The Expected Family Contribution:
The expected family contribution (EFC) provides a theoretical amount that a family may be able to pay based on a parent’s and child’s assets and income. To help provide clarity as to what your expected family contribution might be, we recommend using the EFC calculator below:
College Savings Vehicles:
There are a number of different college savings vehicles that offer specific advantages related to tax-treatment, investment options, and liquidity.
Specifically, there are two types of 529 plans: prepaid tuition plans and education savings plans. Each state has at least one type of plan.
A 529 plan allows a parent, grandparent, or an adult figure in a child’s life to save for their education.The savings can be spent on private education or college. The plan can be established when the child is born so funding can occur over approximately 18 years allowing for a lower contribution each year. This tax-advantaged plan is a very common college savings vehicle.
This allows savers to purchase credits at the current school rate for the child to attend a public or in-state college in the future. This type of plan will pay for tuition but will not pay for any room and board fees. You are not able to prepay tuition for elementary or secondary schools with this plan.
Education Savings Plan
This type of 529 will pay for tuition to any college or university as well as room and board fees. Additionally, an advantage of this type of 529 plan is that up to $10,000 per year can be used to pay tuition for elementary or secondary school. Savers can invest their money into a portfolio so it can grow tax-free until the child requires the money.
Regardless of how you save, you can find out how it compares to your goal below with our calculator tools.