College is outrageously expensive. And it will only get more expensive by the time your kids are ready to apply. Unfortunately, the way we shop for college is all wrong.
Like most families, maybe you haven’t had the opportunity to save enough in a 529 plan. And that’s OK. We can still look for strategies to help you save on the cost. If you know how to shop, the sticker price is irrelevant.
Start With The
Right 529 Plan
Choosing the Right 529 Plan
We don’t sell or manage 529 plans. However we can help current clients evaluate the options. We consider the Utah’s Educational Savings Plan, my529, the standard. my529 offers investment options from Vanguard and Dimensional Fund Advisors. And it has among the lowest fees in the 529 industry. You can open a my529 account directly, which means that an investment advisor isn’t necessary (if you do need help, we are an approved my529 advisor and can help open an account for you as well). By comparing my529 to the quality of investments, total fees, and tax credit offsets of your state’s 529, we can determine which plan is in your best interest. Despite the initial tax advantages, your state’s plan may not always be the best choice. To learn more, schedule a free consultation or visit my529.
Maximizing Financial Aid
College is extraordinarily expensive and most kids will have to graduate with student loans. The good news is that, if you know how to shop, the school’s sticker price is totally irrelevant. What matters only is your net cost.
The Expected Family Contribution (EFC) determines a student’s financial aid eligibility. Most schools use the information reported on the FAFSA (Free Application for Federal Student Aid) to calculate the EFC. Generally, a student with a lower EFC will qualify for more need-based financial aid (Need = Total College Cost – EFC).
It’s important to get an idea of what the student’s family will be expected to contribute in order to plan better for covering the cost. There are strategies to help minimize this value by the time you actually apply for financial aid. To get an estimate of your EFC now, start with The College Board’s EFC calculator.
Optimizing Student Loans
Some estimates suggest that you shouldn’t take on more student loan debt than your expected first year salary after you graduate. Unfortunately too many students get in over their heads with student loans. Education is an investment. If the total cost to attend a school doesn’t justify the expected return, you should consider shopping around for another school that better meats your budget.
There are two types of loans, federal and private. Federal loans are offered by the The U.S. Department of Education. This is the best place to start for every family that needs to fill in financial gaps for the cost of college. Federal loans usually have the most reasonable rates and the subsidized portion of the loan doesn’t accrue interest while the student is in school. The main thing to remember with these direct federal loans is that they are “use it or lose it.” The total amount available for the student’s freshman year is $5,500 (as of 2018). If the student doesn’t use any of this amount in the freshman year, they will not be able to borrow against it the subsequent years. If you need to take out student loans, make sure that you maximize the direct federal loans each year first: $5,500 max freshman year; $6,500 max sophomore year; $7,500 max junior year; $7,500 max senior year. Find out more at the Financial Student Aid Office of the U.S, Department of Education.
Shopping for Schools
We can help your selection process for schools that may most likely meet your family’s financial situation. In this list we include the in-state schools and the student’s choice schools, then add additional schools that meet the student’s academic and social requirements. The idea is to expand the list of colleges families consider in order to improve their chances for aid. The list will include best bets for merit and need aid and the average net cost to attend each school, which is usually drastically different from the advertised cost of tuition. Sometimes one of the private schools ends up being cheaper than a public school.