College is one of the biggest decisions in a person’s life and it is usually made at such an early age. As parents and grandparents, we desire a great start for our kids and grandkids, which we hope does not involve large student debt. How can we make this happen for them and ourselves?
The answer is planning! With planning you can use several tools to brighten the financial future of your student and yourself.
Making college as affordable as possible usually requires several strategies. Through tax efficient savings, maximizing financial aid and creating a roadmap for paying college bills, Cedar Cove advisors help families make the most of their resources.
There are multiple savings strategies for college that provide tax benefits but some of them lower eligibility for certain types of financial aid. For some families, this is a problem and for some it does not matter. Choosing the best strategy depends on each family’s situation.
Lowering the out-of-pocket expenses is a powerful, but often misunderstood strategy. Families may mistakenly judge a school’s affordability based on the cost of attendance or sticker price. Cost of attendance is the all-in price for tuition, books, fees, room & board, etc. It is easy to find the cost of attendance since it is posted on each school’s website. Out-of-pocket cost is a more meaningful number, but it is harder to obtain. Out-of-pocket cost is what a family actually pays for a year of school. It is the bill that is left after financial aid is awarded.
Financial aid is divided into two main categories – need-based aid and merit-based aid. Eligibility for need-based aid is determined by a family’s financial situation. Often families are surprised and even shocked at how much they are expected to pay. While this is very frustrating, merit-based aid can make an enormous difference. Nearly 1 in 3 financial aid dollars comes directly from the schools themselves and is awarded on merit, not need. (College Board) Schools use this money to compete for students they want as members of their college community. It is an enormous piece of the financial aid puzzle.
By developing a relationship with an admissions counselor, students can more effectively position themselves for merit-based aid. Admissions counselors are looking to recruit future graduates, not just fill seats. By building a one-on-one relationship with their admissions counselor, students can communicate that they are taking the college search seriously and are likely to graduate on time. This means having your student contact their admissions counselor early and often. The admissions and financial aid offices will work together to recruit the students they want by offering more merit-based aid to those students. Understanding how colleges make their decisions can help students get a larger piece of the merit-based aid and drive down the out-of-pocket expenses.
Despite the challenges of financing a college education, it is still a powerful investment in one’s future that impacts personal development and career opportunities. By creating a roadmap, families can help their child or grandchild make college more affordable and get a great start to adult life.
If you or someone you care about would benefit from learning how this information applies to a particular situation, reach out to our team. We are happy to have the conversation.
