National Annuity Awareness Month is upon us! Let’s go over how annuities can be an important part of a retirement plan.
College and other forms of higher education have always been a vital part of planning a career. The foundation of any resumé, a recent study interviewing 500 professional recruiters showed that all 500 look for candidates with a college degree [1]. There are also notable earnings advantages with college graduates earning $1.2 million more than those with high school diplomas over their careers [2]. However, that increase in lifetime earnings can come at a steep price with tuition climbing 211% for in-state universities over the last 20 years [3]. Here are a few tips for saving for and funding your child’s college education:
1. Assess early options
Many high schools around the United States offer Advanced Placement (AP) and dual-enrollment classes. AP classes are generally more difficult and target more specific areas of study. Though they are free to students who elect to take the challenge, final tests for AP classes do cost $96 per exam [4] in the U.S. and Canada. Colleges may award credits for scores showing that the student mastered the material.
Dual-enrollment classes function as a partnership between high schools and colleges, and the students pay per credit at the partnered college’s rate for a class with an identical curriculum. They then receive those credits upon class completion as if they were taking those courses on the college campus. Both types of classes can save students and parents valuable time and money in their pursuit of higher education.
2. Familiarize yourself with the aid process
There are many types of student aid, but the most obvious form of assistance provided to students is scholarship money. On top of funds awarded directly from schools, there are also opportunities for privately-funded scholarships granting money on a need or merit-based basis. Students can typically find these opportunities online and apply if they meet predetermined criteria.
Students should also fill out the Free Application for Federal Student Aid, otherwise known as the FAFSA [5]. The FAFSA uses a student’s information to determine how much aid they might qualify for, including money from grants, state-funded assistance or loans.
3. Familiarize yourself with current legislation
One new piece of legislation, the FAFSA Simplification Act of 2020, opened new doors for students trying to qualify for need-based assistance. Previously the FAFSA calculated the expected family contribution, or the EFC, which estimated the amount family members would be able to contribute to a student’s education. EFC has now been replaced by student aid index, or SAI. Where EFC bottomed out at $0, SAI can go as low as -$1,500, meaning students can qualify for more need-based aid [6]. SAI also cuts down on the number of questions and the factors that figure into assistance a student might receive from family.
For students who need more aid, SAI can be addition by subtraction. For example, the 529 plan, which provides tax-advantaged savings for designated beneficiaries, is often used by grandparents to help their grandchildren pay for college. Funds from a 529 plan no longer factor into the expected contributions from family members meaning that they will not have negative implications for the FAFSA’s estimation of how much aid a student requires [7].
4. Research schools prior to selection
Financials could play a large role in deciding on the best fit for your child. For example, students can opt for community college, which generally offers favorable per-credit prices for in-state students. The average cost per credit hour at a two-year community college is $141 while a public, four-year university costs $390 per credit hour on average [8]. Students can usually transfer their community college credits to a university to finish a four-year degree.
Wide-ranging opinions also exist about college selection [9]. Some researchers and surveys suggest that attending a prestigious college could be nothing more than a status symbol, and employers oftentimes may just be looking for a candidate who attended any college.
Sources:
1. https://www.ellucian.com/assets/en/white-paper/credential-clout-survey.pdf
2. https://www.forbes.com/sites/michaeltnietzel/2021/10/11/new-study-college-degree-carries-big-earnings-premium-but-other-factors-matter-too/?sh=6fd5ad4035cd
3. https://www.usnews.com/education/best-colleges/paying-for-college/articles/2017-09-20/see-20-years-of-tuition-growth-at-national-universities
4. https://apcentral.collegeboard.org/exam-administration-ordering-scores/ordering-fees/ordering-exam-materials/help/cost-of-exam
5. https://studentaid.gov/
6. https://unicreds.com/blog/student-aid-index
7. https://www.usnews.com/education/best-colleges/paying-for-college/articles/tips-for-grandparents-using-a-529-plan-to-save-for-college
8. https://educationdata.org/cost-of-a-college-class-or-credit-hour
9. https://www.nbcnews.com/business/business-news/does-it-even-matter-where-you-go-college-here-s-n982851
