(StatePoint) When it comes to financial resolutions, a new survey suggests that creating a plan to pay for college should be top of mind for more families.
Only 54 percent of parents are comfortable with their plan to pay for their child’s college education, according to a College Ave Students Loan survey conducted by Barnes & Noble College Insights.
As you solidify your New Year’s resolutions, consider the following financial strategies:
• Apply for reputable scholarships and grants early and often. One easy one to apply for is the College Ave Student Loans $1,000 Monthly Scholarship Sweepstakes.
• Submit the Free Application for Federal Student Aid (FAFSA), even if your family has a high income. Doing so is the only way to access the big pool of financial aid available from the U.S. Department of Education, which awards over $120 billion annually in the form of scholarships, grants, work-study programs and loans. What’s more, states and some individual schools use it to determine aid packages as well.
• Ask family members to gift or contribute toward the cost of education.
• Fine-tune the college application process to save money. For example, zero in on state schools for in-state tuition, or schools where your child’s grades and SAT scores are above average to boost the likelihood of receiving merit aid.
• Ninety-one percent of parents currently help or plan to help their child pay for college and 75 percent of parents expect their child to help pay, which means that for most families, a candid discussion about what you can afford and how much you expect him or her to contribute is essential.
• Financial aid letters arrive in the spring. Review this, and if your expected family contribution (EFC) is more than you can afford, reach out to the financial aid office to discuss.
• If needed, borrow federal loans in the student’s name first. They carry special benefits, such as public service forgiveness and income-driven repayment options not typically available on private loans.
• When federal loans in the student’s name don’t cover you fully, consider a private student loan or parent loan with a good interest rate. You may also need to find a cosigner with strong credit. With the pre-qualification tool offered by College Ave Student loans, you can find out if your credit qualifies for a College Ave loan and what rates to expect before applying. Pre-qualification does not affect your credit score, making this a convenient way to get your ducks in a row. To learn more, visit CollegeAveStudentLoans.com.
“Families would be wise to prioritize their plan for financing college so they are not taken by surprise when the first tuition bill is received,” says Joe DePaulo, CEO and co-founder of College Ave Student Loans. “Knowing where the money is going to come from is essential.”
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Just how much are all those stories about crippling student debt having on college campuses? You have only to ask post-millennials now trying – although not always successfully – to avoid being saddled with the same heavy burden of debt as their predecessors.
Not only did 83 percent of current college students surveyed consider what their total costs would be before matriculating – just 69 percent of recent graduates had such foresight – but 39 percent of them said the potential price tag was such “a huge factor” that they purposely limited their choice of schools to the most affordable, according to Fidelity Investments’ new “College Savings: Lessons Learned Study.” Only 32 percent of recent graduates, alas, had shown similar restraint.
“It seems today’s college students are perhaps more aware of the financial situation they entered into than those who graduated before them,” says Melissa Ridolfi, Fidelity’s vice president of retirement and college leadership. “That’s a positive development.”
All told, student debt in the U.S. now totals more than $1.5 trillion – second only to mortgage debt, Forbes reports. And the 69 percent or so of the Class of 2018 who took out student loans graduated with an average debt balance of $29,800.
So it’s understandable why recent graduates would be so anxious over whether they’d ever be able to pay off their loans that they’re now having second thoughts about their decisions:
• 40 percent say that while they don’t regret going to college, they would have made different choices in hindsight.
• Only 14 percent felt the value of their education was worth more than the money they had spent.
And future college students should listen to this sage advice from the more than 4,000 respondents surveyed – all recent graduates, current undergraduates, and parents of either or both – on what would have done wonders to ease their own stress levels.
“When asked ‘If you knew then what you know now when it comes to school selection, what would you do differently?’ the no. 1 answer for all respondents was ‘I would have started saving earlier,’” Ridolfi says.
Which logically brings us to another key finding of the study: only 17 percent of current students and recent graduates had taken advantage, prior to college, of what’s arguably one of the best ways to fund higher education – 529 savings plans.
Unlike regular bank savings accounts, they provide a tax-advantaged way to save money to cover tuition, books and other education-related expenses at most accredited two- and four-year colleges, universities and vocational-technical schools.
The key phrase being “tax-advantaged.” Meaning, earnings grow federal income tax-deferred and withdrawals for qualified expenses are free from federal (and, in many places, state) income taxes – thus affording the opportunity to have even more saved for college.
Significantly, Ridolfi says families using a 529 plan managed by Fidelity have been starting to sock money away earlier than ever before, with contributions beginning on average when the child is about age six-and-a-half. Thirty-six percent of Fidelity 529s are even opened for beneficiaries under age 2.
You say a child hasn’t even uttered his or her first complete sentence before they’re two? Probably not. But just so you’re not bushwhacked when they suddenly hit their late teens, free online resources such as Fidelity’s College Savings Learning Center and College Savings Quick Check– a calculator that even shows you the impact of saving a few dollars more a month – can help prepare you for what lies ahead.