Figuring out the best way to pay for college can be exceptionally easy, if you are in the top 5% of earners in this country. Most of them can cash flow it out of their income. For the rest, it can be a challenge! The number of variables considered makes it a complicated process for many. How many of these questions have kept you up at night?
1. How much has been saved?
2. How much is enough?
3. What’s the best place to borrow? (It’s not just about the lowest rates…)
4. How much will you student’s career choice earn in order to pay off loans?
5. Should I spend assets or borrow?
6. How many children are planning on going to college?
7. How much income can be budgeted for college?
8. What if I lose my job or transfer to a new state?
9. What is my EFC (Expected Family Contribution)?
10. Can my EFC be lowered?
11. How do I maximize tax advantages?
12. Is applying for outside (outside of the college) scholarships worthwhile?
13. If I spend assets or borrow for my child, will it affect my retirement plans?
14. What if they don’t graduate in 4 years? (Only 50% graduate in 6 years…)
15. What will transferring schools cost in time to graduate and scholarship money?
16. What if they drop out?
As you can guess, there isn’t one answer that fits every family. Each family will have different numbers but the path is similar.
Step 1 - Finding the grant and scholarship money. That is money that you don’t have to pay back. School choice has a lot to do with how much is available. In addition, your student’s grades and test scores could EARN them a better price. Lastly, employ strategies to reduce your EFC, if possible.
Step 2 – Determine impact of borrowing over spending down assets or income. Questions to answer include: What are the current interest rates? Is the stock market at a top or bottom? How will spending (selling) assets affect next year’s FAFSA or CSS Profile? Which assets are hurting me most in FAFSA or CSS Profile?
Step 3 – If borrowing is necessary, how much and by whom?
Step 4 – Include your student in these conversations. If they see what the cost of their education will be and its impact on their (and your) financial future, they need to take it seriously. Extra semesters/years are very costly. Most merit aid lasts only 4 years.
If this sounds like a lot, it is. College has gotten to be very expensive over the last couple of decades and the path to paying has gotten very complicated! If you need help getting through this process, call or email me.