Navigating the many facets of paying for college can be challenging. Over the last 30 years, education costs have soared by more than 500 percent. To complicate matters, college prices are like airline tickets: no one pays the same price. On average, 70 percent of students do not pay full price for the same education. Therefore, it’s important to develop a plan and know the financial tools available to help finance the expense.
To maximize the pool of funds available for you, proper timing and funding strategies (including scholarships, student loans, grants and financial aid) should be considered and utilized. Here are six steps you can take to help save properly and get the best price for your college education.
Step 1: Start Saving Now
One of the most popular college savings vehicles is the 529 plan because of its flexibility and tax advantages. Plan savings can be used for eligible postsecondary educational institutions both nationwide and internationally which include colleges, universities and vocational schools. Contributions to these plans often offer tax deductions and, when used to pay for qualified college expenses, earnings are tax-free. Additionally, the named beneficiary on the plan does not have control over the account, so you can be assured that the funds will be used for their intended purpose.
Step 2: Understand What Your College of Choice Will Cost
The true cost of college tuition used to be extremely opaque. However, every school in the country must now include a Net Price Calculator on its website. This tool estimates your individualized cost of attending that school by answering questions about your financial situation. Providing information on your student’s GPA and extra-curricular activities helps estimate how much money in grants and scholarships the school may award.
Step 3: Determine Your Eligibility for Aid
Students and their families are expected to contribute to the cost of college to the extent they can. For families who are unable to pay for the entire cost of a student’s college education, financial aid may be available. In these instances, the Expected Family Contribution (EFC) formula considers your family’s adjusted gross income, taxable investments and family size when determining how much financial assistance you may be eligible for. The difference between the total cost of college and your EFC is how a student’s financial need is calculated.
The College Board is a great resource to help determine your EFC amount.
Step 4: Enhance Your Eligibility
Maximizing financial aid eligibility can be critical when funding a college education. Repositioning your assets prior to applying for aid can significantly impact how much you are awarded. Here are a few tips to keep in mind as you prepare: