Paying for college is more than just savings and financial aid.
It’s actually about acquiring other low-effort financial literacy skills and finding, simply, plans that are more tax-advantaged.
And no, there are steps that don’t require you to be investment-savvy at all.
About 70 percent of all American families, according to Fidelity Investment’s 10th Annual College Savings Indicator Study, help pay and offset the costs of higher education for their kids, but most families aren’t on track to fulfill the financial needs on time.
According to a study by Sallie Mae called "How America Saves for College", here are the five overlooked steps that can help foot the bill of skyrocketing college tuition.
1.Start a 529 college savings plan: These are state-sponsored, tax-advantaged education plans “designed to benefit any income level.”
2. Carefully fill out the Free Application for Federal Student Aid (FAFSA):
“Filling it out not only unlocks access to federal aid such as student loans or the Pell Grant.
3. Get as much out of federal loan options, before considering private loans: “Federal loans, such as the Stafford, have more flexible repayment options compared with private loans.”
Here are 10 advantages of seeking out federal loans:
According to a NerdWallet analysis, families left up to $2.3 billion on the table this year in federal grant money.
4. Negotiate University or College financial aid awards:
The difference between need-based and merit-based awards is too great for students and families to ignore and not explore.
5. Scholarships: The search for scholarships should begin at the early stages of college-bound high school students.The number of parents saving up for college is growing, with nearly three-quarters of those parents saving up to “a median amount of $300 per month,” according to the Fidelity study. But while this number is growing, parents are only on track to fulfill 29 percent of that goal by the time their children reach freshman year according to the Fidelity study.
And below are numbers from the same study by Fidelity that captures the average amount of savings by parents at various age groups of their children:
- Parents with kids ages 0-to-5: $20,700
- Parents with kids ages 6-to-13: $39,300
- Parents with kids ages 14-to-18: $52,300
Some estimates place the tuition costs of universities and colleges in 18 years at about $500,000. The numbers of average savings above, clearly, will not be able to keep up with the meteoric rise of tuition.
Saving for college has to begin with more than just setting aside money.
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