By Dave Coen
If you’ve looked into any aspect of college planning, whether that’s researching accounts to save in or figuring out your eligibility for financial aid, you probably felt overwhelmed pretty quickly. Often, questions about college planning just lead to more questions, and it’s hard to find consistent advice and facts online. Sometimes you just want a simple FAQ list to answer your most pressing concerns.
Thankfully, I can provide that for you. My goal is always to be a resource for families to answer their myriad of financial questions regarding college planning and beyond. I hope these answers help you wrap your mind around the college planning process!
1. Should I Really Pay For College Planning Advice?
You don’t know what you don’t know. And often you don’t know until you are neck-deep in the process, which can sometimes be too late. Think of it this way: you see the value in getting professional help with your retirement, right? You want to maximize every penny and utilize strategies that will help you reach your goals so you can live a worry-free retirement. Well, with current college costs at an all-time high and projected to increase, don’t you want to make the most of your money there too?
I’ve seen all too often how many people lack college planning information that could save them tens of thousands of dollars. Isn’t that amount of savings worth paying for advice? Plus, your finances do not exist in a bubble. Every aspect of your financial life impacts other aspects. For example, if you end up paying more than necessary for college, that could mean less money for a family vacation, extra debt taken on, or worse, dipping into your retirement fund. College planning advice can help your entire financial life.
2. How Do I Find The Right Advisor?
A good financial advisor looks at your entire life, your family, and your personal goals, passions, and values and helps you create a plan for your finances so every part of your life can be aligned.
So when you are looking for someone to help you with college planning, don’t just look at education and experience. Find out what their process looks like and what non-college planning services they offer. Ask them how they plan to help you with your needs and concerns and whether what they offer is the right fit for you.
At College Planning America, we combine financial planning with college planning, securing your financial future while also helping your child start their young adult years a step ahead. Our plans are not only customized to your goals, circumstances, and unique needs, but they address every piece of the college planning process, from filling out the FAFSA, to choosing accounts to save in, to finding the right college for your child.
3. What Are The Top 3 Factors For The Best College Fit?
Speaking of the right fit, what are your child’s expectations for college? Do they want to go where their friends are going? Are they drawn to a certain city? Or is their priority highly recommended classes and professors? These are all things to take into consideration when finding a college that is the right fit for your child, but they aren’t the most important. Here are 3 factors that should top your list when researching colleges:
Student Compatibility
Look at your child’s skills, experience, giftings, goals, and career ideas. Then look at colleges that have specific programs that match their talents or majors and network connections that will help them start their careers.
Student Eligibility/Success
Is this a school your child will be able to get into? This is where it pays to start early. Depending on the schools on your list, you will need to know what GPA, SAT scores, or extracurricular activities your child needs to qualify. Even if your child is eligible for the school itself, the particular program they want may have extra requirements.
Other things to look at are the graduation rates, career success, and financial aid opportunities.
Family Financial Situation
Not all colleges are the same. You could end up paying thousands more or less every year depending on what you choose. It’s fun to dream, but if you know there’s no way you could afford a certain school, even with financial aid, it shouldn’t be considered a fit.
This means that you need to know what’s going on with your finances. How much do you have saved for retirement? Will it be enough? Does your monthly budget allow you to pay a tuition bill? Do you have any big expenses coming up? What about your debt load?
Finding the right college for your child is more than finding a school that looks good on paper, it’s about finding a school that your child can get into that fits your child’s talents and goals and aligns with your family’s values and finances.
4. What Are My Two EFC Numbers, And How Much Will I Pay?
The EFC can be confusing, which means it can be equally confusing to figure out how much you are responsible for paying.
Your EFC is calculated based on the financial information you provide on the FAFSA (Free Application for Federal Student Aid). The number you get is determined by factors such as parental income and assets, child’s income and assets, schools you are applying to, etc. It’s the amount the government assumes a family will be able to pay toward the student’s college costs, and it affects how much your child will receive in financial aid. Your neighbor’s student at the same high school with the same grades and SAT scores will pay a different amount than your student because their EFC is unique to their situation.
But there are two EFC calculations, because one isn’t frustrating enough. Federal methodology (FM) determines eligibility for need-based aid from most colleges and universities as well as federal and state governments. Institutional methodology (IM) is based on a certain college’s own financial aid forms. That means that, going back to college fit, college choice also plays a significant role in your final EFC number.
How much you end up paying out of pocket depends on which school you go to, since your eligibility for aid depends on your EFC plus the cost of the school you will be attending. Your EFC will have a different impact on different schools, all based on how much it costs to attend.
The good news is that you have some control over your EFC. By starting early, you can make some financial changes and strategize details to optimize your number, therefore maximizing the amount of aid you receive.
5. How Do I Pay For College?
You’ve got your EFC and you know how much the college your child chose will cost. Now, how will you pay for it? Ideally, you’ve been planning ahead for years, saving in the right accounts and seeing growth from compound interest. But if you still fall short, where do you get the money from?
First, your retirement account should not be an option here. Your retirement is more important than your child’s college tuition. You can borrow for college, but you can’t borrow for retirement. When you use your retirement money for college costs, you could experience penalties and taxes, not to mention the loss of growth potential. Yes, your child’s education is important, but if your retirement accounts suffer, they may have to take care of you when they’re older. Is that worth it?
You have many options and strategies at your disposal to ease the financial burden of college, including work-study programs, grants, and scholarships. How you pay for college will come from the savings you’ve already earmarked, scholarships, grants, contributions from your child’s part-time job, work-study programs, or monetary gifts from family members. Once those resources are exhausted, you can apply for student loans. You don’t want your child saddled with debt when they graduate, so maximize your other options first.
Do You Have More Questions?
These answers just touched the tip of the iceberg. College planning is quite the process, but it doesn’t have to be mysterious or intimidating. Whether you want to understand how everything works or just want someone to do all the work for you, we are here for you. Get started by emailing me at dcoen@sageviewadvisory.com, calling 800-814-8742, or taking our college strategy quiz!
About Dave
Dave Coen is a Financial Advisor with SageView Advisory and the CEO of College Planning America. Along with his retirement financial industry experience, he is a College Planning Specialist. He works closely with individuals and families to provide them comprehensive financial planning that addresses all elements of their financial picture. Learn more by connecting with Dave on LinkedIn.
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This material is designed to provide accurate and authoritative information on the subjects covered. It is not however intended to provide specific legal, tax, or other professional advice. For specific personal assistance, the services of an appropriate professional should be sought.
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