The Right College Funding Coach: How CWM Can Help You Plan And Mitigate College Expenses
Are you financially prepared to send your child to college?
Most parents want to help their kids cover the cost of higher education. In 2021, 83% of parents with a child in college helped with at least some of the bill. Most of these parents covered about 54% of their students' costs.
Helping your child pay for their college education can reduce their debt and may help improve their chances of graduating. However, it's never smart to put your own retirement, home, or financial future at risk to help cover educational expenses.
What if someone could help you plan for and mitigate your child's college costs?
Someone can! Cooke Wealth Management offers help to build a college funding plan.
What Can a College Funding Coach Do For You?
A college funding coach can help you address four key questions:
How and when should I start saving for my child's education?
How much and what type of college can I afford?
How much might my financial aid package cover?
What will I need to pay out of pocket?
Once you have a clear answer to these questions, you can create a financially viable strategy to put your child through college.
When we sit down with clients, we talk about how to save for your child's education without jeopardizing your retirement. We'll discuss ways to save for your own future, while helping your child meet their college expenses. And we'll go through the advantages and disadvantages of various college funding strategies. When it comes time to send your child to college, you can have a plan for how you’re going to fund all four years of college.
Finding the Right Investment Strategy for College Funding
You can use one or more of several financial instruments to save for college.
Stock funds (Mutual Funds or Exchange Traded Funds (ETFs) — Investing in mutual funds or ETFs through a taxable account can help you grow your child's college savings. Consider investing in low-risk index funds to help save towards the cost of college. These funds, however, increase your overall assets and thereby may reduce your child's eligibility for federal aid or grant money.
U.S. Savings Bonds — You can redeem series EE and I bonds purchased after 1989 tax free if you use the funds for qualifying educational expenses. Click here to learn more about when you might use a Savings Bond for College.
Coverdell Education Savings Accounts (ESA) — U.S. law permits qualifying citizens to contribute up to $2,000 a year to a Coverdell ESA where it can grow tax-free if used for qualified expenses. The easiest way to think about a Coverdell ESA is this: It's like a Roth for educational costs instead of retirement. However, ESAs are not for everyone. They come with strict income limits, and if you make over this amount you may not be eligible to contribute.
529 Plans — U.S. citizens who do not meet the qualification guidelines for an ESA or who want to contribute more than $2,000 a year may opt for a 529. This money grows tax-free if used for qualified education expenses. There’s no annual contribution limits for 529 plans, however, contributions made to a plan are considered a gift to the beneficiary. In 2022, gifts up to $16,000 per individual will qualify for the annual gift tax exclusion. 529 plans can differ substantially from one another, and it's important to know the rules around your particular plan.
UTMA or UGMA (Uniform Transfer/Gift to Minors Act) — This plan is not specifically an education savings plan. It's an account that an adult may create for a minor. Once the minor turns 18 or 21, they control the account. They may use it for college or any other expense they choose. Due to the negative impact, these accounts have on financial aid eligibility, you might consider a 529 plan instead.
Are Student Loans Okay?
Student loans have become a crisis in America. Today, the average borrower owes $38,792 in education loans. Student loan debt is growing six times faster than the U.S. economy as a whole.
Often, borrowers don't even use their loans for tuition or other fees. Instead, they use it for clothes, eating out, dates, or vehicles. When they graduate from college, these student loan borrowers typically owe around $400 a month — for 10 years.
Do you want your child to start their post-graduation life nearly $40,000 in the hole?
If not, don't rely on student loans.. Find another way to pay for college.
Tips to Reduce Your Child's College Costs
How can you reduce your child's college expenses?
Choose an affordable school. Across America, 5,300 colleges are competing for students. Their prices vary from free to over $80,000 a year. Elite institutions may not offer the benefits your child is hoping for. Pick a school that will compete for your student, often resulting in them providing more aid, but most importantly pick a school you can afford.
Consider community college. Many community colleges offer steep discounts for the first two years of college over four-year university . The quality of education is usually the same at any institution, and transferring credits is often simple.
Apply for financial aid. Get all the grants and scholarships you can. First, complete the Free Application for Federal Student Aid (FAFSA), and any other financial aid applications your college may require. Then, research and apply for private funds.
Work while in school. A part-time job can help cover transportation, clothes, meals out, and other ancillary expenses.
Live at home. On-campus housing and meals cost much more than living at home. - especially for those of us who live in California.
At Cooke Wealth Management, we can help you develop a comprehensive plan that gets your child to and through college — without taking on student loans. Call us today to set up an initial appointment.