Silverhawk Private Wealth College Planning Archives

4 Tips to Save For and Fund Your Child’s College Tuition

May 12, 2022

College is an investment in your child and your family, but it can come at a hefty price. Here are some tips to save!

College and other forms of higher education have always been a vital part of planning a career. The foundation of any resume, a recent study interviewing 500 professional recruiters showed that all 500 look for candidates with a college degree^[1]. Some common rebuttals to the argument for college might start with names like Zuckerberg, Jobs, Gates and Oprah Winfrey, all who dropped out school. Those four have incredible stories, but they’re the exception, not the rule.

The average college graduate with a bachelor’s degree has a lifetime earnings of $2.8 million while a person who achieved a high school diploma earns an average of $1.6 million over their career^[2]. At the same time, that average increase in lifetime earnings can come at a steep price, and that price is only rising. Tuition has climbed 211% for in-state universities over the last 20 years^[3], escalating panic in students and their families who are forced to shoulder the burden. Without a plan to tackle them, loans can hang over a student’s head for decades. To alleviate some of that stress, here are a few tips for saving for and funding your child’s college education:

Assess early options

Many high schools around the United States offer Advanced Placement (AP) and dual-enrollment classes. By taking these higher-level courses while still in high school, students can be awarded college credits early, potentially at an even lower cost. AP classes are generally more difficult classes targeting more specific areas of study within a subject. They’re widely accepted and acknowledged throughout U.S. colleges, and they are free to students who elect to take the challenge. End-of-year tests for AP classes do cost $96 per exam^[4] in the U.S., but colleges may award credits based on scores that would be evident of the student mastering the material.

Dual-enrollment classes, on the other hand, function as a partnership between high schools and colleges. A dual-enrollment class holds high school students to the college-level standard and curriculum. The students then pay per credit at the partnered college’s rate and receive those credits upon class completion as if they were taking those courses on the college campus. Both types of classes can save students and parents valuable time and money in their pursuit of higher education.

Familiarize yourself with the aid process

There are many types of student aid, and amounts can vary based on a plethora of factors. The most obvious form of assistance provided to students is scholarship money. It can be awarded based on test scores, academic results, athletics or extracurricular activities, and amounts can fluctuate based on a student’s choice of school. There are also opportunities for privately-funded scholarships that can be awarded by foundations, religious groups or other organizations on a need or merit-based basis. Students can typically find these opportunities online and apply if they meet predetermined criteria.

Students should also fill out the Free Application for Federal Student Aid, otherwise known as the FAFSA^[5]. The FAFSA uses a student’s information to determine how much aid they might qualify for, including money from grants or state-funded assistance. It can also determine how much a student could qualify for in loans if those become necessary.

Familiarize yourself with current legislation

Legislation is always changing for parents looking to get a jump-start in funding their child’s education. For example, the FAFSA Simplification Act of 2020 opened new doors for students trying to qualify for need-based assistance. Prior to the FAFSA Simplification Act of 2020, the FAFSA calculated the expected family contribution, or the EFC. The EFC estimated the amount family members would be able to contribute to a student’s education based on income, assets and other benefits. EFC has now been replaced by student aid index, or SAI. Where EFC bottomed out at $0, SAI can go as low as -$1,500, meaning students can qualify for more need-based aid^[6]. SAI also simplifies the form itself, cutting down the number of questions and the factors that figure into assistance a student might receive from family.

Where this could truly be a boon to students who need more aid is through family members whose contributions were accounted for in the EFC but are not accounted for in the SAI. The popular 529 plan, which provides tax-advantaged savings for designated beneficiaries, is often used by grandparents to help their grandchildren pay for college. Funds from a 529 plan no longer factor into the expected contributions from family members meaning that they will not have negative implications for the FAFSA’s estimation of how much aid a student requires^[7].

Research schools prior to selection

Cost can differ by school selection, and though some students have their hearts set on a specific university, financials could play a large role in deciding on the best fit for your child. For example, students who do not expect to receive much aid from family or scholarship opportunities can opt for community college. Community colleges generally offer favorable per-credit prices for in-state students. The average cost per credit hour at a two-year community college is $141 while a public, four-year university costs $390 per credit hour on average^[8].

After two years at a community college, students can usually transfer their credits to a university to finish a four-year degree. Wide-ranging opinions also exist about college selection^[9]. Some researchers and surveys suggest that attending a prestigious college could be nothing more than a status symbol. Employers can look for many qualifications such as experience, extracurriculars, ability or the simple fact that a candidate attended any college. At the end of the day, the right choice of school will be different for each student.

If you have any questions about saving or planning to help your family, please give us a call! You can reach your private wealth advisor at Silverhawk Private Wealth by calling 480.296.0200. We have offices across the United States to serve you.

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5 Facts about College You Need to Know

September 29, 2016

Whether you have children, grandchildren, nieces or nephews headed to college when they turn 18, it’s always best to put anticipated higher education expenses into your financial plan–the sooner/younger the better.

Contact your Private Wealth Advisor at Silverhawk Private Wealth at any time to discuss. And keep reading to learn more.

FAFSA dates have just changed

For students college-bound in the 2017-2018 school year, there is an important FAFSA date change: the application date was just changed from January 1, 2017 to October 1, 2016—three months earlier. Details here.

Even if you think your family makes too much money to qualify for aid, most experts say you should apply for FAFSA (Free Application for Federal Student Aid) anyway, because colleges, state scholarship agencies, and foundations use the FAFSA when deciding who gets their scholarships, as well as how much money each student will receive.

Students already on campus should also apply every year. (School deadlines may be different from FAFSA deadlines.)

In terms of job prospects, a college degree is more necessary than ever.

According to the Department of Education,“a postsecondary credential has never been more important” because:

The average bachelor’s degree recipient will earn about $1 million more in their lifetime than those without a postsecondary education.
By 2020, an estimated two-thirds of job openings will require postsecondary education or training.
College graduates with a bachelor’s degree typically earn 66% more than those with just a high school diploma and are less likely to face unemployment.

The Wall Street Journal says salaries are rising for new college graduates. “Americans who earned a bachelor’s degree in 2015 landed a job with an average starting salary of $50,651, 5% above the average starting salary for 2014 grads.” Unemployment for recent college grads from 22- to 27-years-old was cited at 4.6% in the article.

The cost of a college degree is high, second only to a home mortgage.

It’s no secret that college costs have skyrocketed. “College has never been more expensive…over the last three decades, tuition at four-year colleges has more than doubled, even after adjusting for inflation,” according to the Department of Education.

For the 2015-16 school year, the College Board estimated the average tuition and fees to be $9,410 per year at four-year, in-state public institutions plus room and board at approximately $10,000 annually.

When you total various scenarios, the average cost of a bachelor’s degree ranges from $52,000-$130,000—or more, depending on whether your child attends in-state or out-of-state, public vs. private university, attends community college first, and whether or not they have housing and food provided.

Why so much? According to a Center for American Progress report, it was “the Great Recession and resultant state budget cuts that led to the public college tuition hikes which have unduly burdened low- and moderate-income families.”

Student debt is the highest in history

The average class of 2016 graduate with a student loan will owe more than $37,172, the highest level of debt yet. Almost 71% of bachelor degree recipients will graduate with a student loan, compared with less than 50% two decades ago.

Student debt is a $140 billion-a-year industry, with 42 million Americans bearing $1.3 trillion in student debt. The federal government holds 93% of these outstanding student loans, making the Department of Education, in essence, one of the world’s largest banks.

Try NOT to sacrifice retirement for college

A recent survey of parents by HSBC Group found that a whopping 98% of U.S. parents are considering a college education for their child—and 60% would be willing to go into debt to fund it. And 37% of U.S. parents say their children’s education is more important than their own retirement savings.

Commenting on the findings, HSBC’s Global Head of Wealth Management said:

“The financial sacrifices that parents are willing to make to fund their children’s education are proof of the unquestioning support they will give to help them achieve their ambitions. However, parents need to make sure that this financial investment is not made to the detriment of their own future wellbeing.

“By having a financial plan to meet their family’s overall needs and reviewing it regularly, parents will be better placed to support their children’s studies without compromising on their own long-term financial goals.”

A recent segment on CNBC agrees that sacrificing your retirement is not the best decision in the long run, and urges people to plan early: Watch here.

Let’s discuss ways you can plan ahead to maximize your portfolio and fund both college tuition and your retirement. Call us at 480.296.0200, or email info@silverhawkfinancial.com.

Category: College Planning

4 Tips to Save For and Fund Your Child’s College Tuition

5 Facts about College You Need to Know