Saving for college costs is important. But there’s more to college planning than just saving money. Consider these ideas to help you cut back on the cost of college. Remember, every dollar that you don’t have to put toward college tuition can be reallocated for other important purposes, such as retirement savings.
Cut college costs
Ask these questions and discover ways to potentially reduce your out-of-pocket expenses:
- Research the cost of each college. Look at cost of attendance, graduation rates, and room and board costs. The four-year estimated “sticker price” is NOT necessarily the price you have to pay.
- What financial aid are you eligible for? Need-based financial aid can substantially reduce the family out-of-pocket college costs.
- Study how the school determines your financial aid eligibility. This affects how much you have to contribute to the annual costs. (There are ways to reduce the amount you have to pay.)
- What merit-based scholarships do you qualify for? School based merit scholarships can significantly reduce college costs.
- What is the most efficient way for you to save for college? Analyze the options, including tax-advantaged college savings investment accounts.
- How well does your state-sponsored 529-plan measure up? Review important tax benefits of the state-sponsored 529-plan, as well as plans from other states. (A financial advisor can help you select which plan may work best for you based on investment performance as well as tax advantages.)
- What are your education tax credit options? Evaluate which education tax credit/savings options may yield the most tax savings.
Key considerations to keep costs down
Three of the most valuable considerations are the Expected Family Contribution (EFC) calculation, the projected aid package, and the analysis that determines if you may be able to further increase financial aid eligibility with the help of college planning strategies.
The expected family contribution is the starting point college planning. It’s a calculated assessment, based on a family’s financial and household information, and it’s what you’re expected to pay for college before you qualify for any need-based financial aid from a school.
Keep in mind: many families making more than $150,000 per year still qualify for need-based financial aid. But you still need to be able to meet your expected contribution in order to qualify. Because need-based financial aid can significantly reduce the out-of-pocket college costs, it’s important for you to make sure you’re able to cover your expected family contribution.
Study the colleges
It can sometimes cost you more to send your child to a “cheaper” school than a pricier one. That’s because of the financial aid packages offered. In addition to having your own finances in order, you should know a school’s history of giving money before you apply. This can ease the disappointment if you get a bad financial aid package from your child’s top school choice.
Ultimately, you want to pick the right college for your child, at the right price, for the right reasons. Working with a financial planner can help ensure that your finances are in order. We also help you ask the right questions to make sure you can afford the school your child picks.