College Financial Planning 101: What Options Are Available?
The sooner you can begin college financial planning, the better off you’ll be in the long run.
Contributing Writer at Tally
May 11, 2022
The cost of college can be expensive. Between tuition, room, board, books and other expenses, you could find yourself having to pay tens of thousands of dollars each academic year. This doesn’t even take into account the interest you’ll have to pay if you take out student loans.
The sooner you can begin preparing for college expenses, the better off you’ll be in the long run. Below, we’ll discuss college financial planning — including how much college costs — and some of the things you can do to put yourself in a better financial position.
How much does college cost?
In the United States, the average cost of college is $35,331 per student per year. This includes:
Other required living expenses
However, these costs can vary considerably depending on where you plan to go to college. For instance, the cost of attending a public institution is approximately 73% less than the cost of attending a private college.
Understanding the cost of college tuition is perhaps the first thing to consider when planning financially. Let’s take a closer look at the steps toward college financial planning you can take now.
What can you do to prepare for the cost of a college education?
There are a few things you can do to help prepare for the costs associated with receiving an education. One important thing to remember is that the earlier you start college financial planning, the better off you’ll be in the long run.
1. Evaluate your budget and set expectations
The first step in college financial planning is evaluating your budget and setting expectations for how you want to pay for school.
For instance, let’s say you’re the parent of a high school student. It’s worth sitting down with your teen and discussing where they are interested in attending school. You can then show them the costs of enrolling in these schools full time.
It’s also wise to have a solid sense of your budget. If you’re a parent, you can discuss with your student how much, if any, you’re willing to pay for their education.
If you’re enrolling yourself, it’s important to have an understanding of how much you can reasonably pay per year. That way, you’ll be able to figure out how much outside money you’re going to need to bring in to cover the cost of your schooling.
Many schools offer net price calculators, which you can use to help determine the cost of attending the university. You’ll enter a bit of personal information to find out what you can reasonably expect in a given academic year.
From there, you can hone in your list of potential schools you’re willing to attend. For example, perhaps you look at your budget and realize you can’t attend a private college. Or, maybe you decide to attend two-year community college instead, and then transfer into a four-year school a little later.
This will also help you save on college admission fees. The cost of an application can be up to $100. If you won’t be able to afford to attend the school, there’s probably no point in spending money on an application. Mapping out your budget and schools of interest allows you to formulate a reasonable path forward.
2. Establish a 529 plan
If you’re a parent preparing for a child to go to school, you may want to consider opening a 529 college savings plan, otherwise known as a qualified tuition plan. These state-sponsored investment plans allow you to save money on behalf of a beneficiary, like a family member or child. You can use the funds in the account to pay for education expenses, possibly including things like books and fees.
There are also some tax benefits that come with 529 plans, since withdrawals are tax-free. You may have additional federal or state tax benefits as well, depending on where you live.
There are two types of 529 plans:
Prepaid tuition plans allow you to pay in advance to a school directly.
Education savings plans allow savers to open an investment account that can be used for a wide range of future expenses.
Every state in the United States, as well as the District of Columbia, offers one of the two different types of plans at minimum.
You may want to consider sitting with a certified financial planner (CFP) or financial advisor to learn more about the types of 529 plans in your area. CFPs and advisors can also help you sort through eligibility criteria and the enrollment process.
3. Start a savings account
In addition to a 529 plan, you may want to consider setting up a savings account as part of your college financial planning. A savings account could be particularly useful in the years leading up to college, as it offers a safe place to store your money. If possible, try to find a high-yield savings account with a generous interest rate, so you can earn as much money as possible on your principal.
4. Apply financial aid with FAFSA
As a student prepares to enroll in college, they’ll want to fill out the Free Application for Federal Student Aid (FAFSA). FAFSA is a form that is generally required if you’re seeking outside funding. This can include everything from student loans to scholarships, grants and work-study programs.
5. Discuss options with your college financial aid office
College financial aid offices are tremendous resources for those looking to cut down on the cost of their education. These offices can help with anything from completing your FAFSA form to finding scholarships or grants dedicated to your specific area of study.
You’ll quickly find that there are many different ways to pay for college. Taking the time to fill out applications for grants and scholarships may be time-consuming, but they can help cut down on the cost of college considerably. Students often do not have to repay any scholarship or grant money they receive.
Student loans are also an option, but be mindful of the fact that repayment is required. The interest on these loans also accumulates. If you’re considering taking on loans, come up with a plan to repay your student loan debt after graduation.
Start your college financial planning journey today
Paying for college is no small task. When you consider that the average academic year can cost tens of thousands of dollars, it’s easy to see why college planning is so important.
Fortunately, there are some things you can do to help put yourself in a better financial position. Determining your budget, being strategic about where you attend school and applying for financial aid are all examples of steps you can take to prepare for the cost of attendance at an institution of higher education.
One of the other things you can do to prepare for the cost of college is to get control of your outstanding debts. Using Tally† could be a great place to start. Tally is a credit card payoff app designed specifically to help you pay down existing credit card debt and manage your due dates. By paying off your existing debt, you can free up cash that you can put toward college funding.
†To get the benefits of a Tally line of credit, you must qualify for and accept a Tally line of credit. The APR (which is the same as your interest rate) will be between 7.90% and 29.99% per year and will be based on your credit history. The APR will vary with the market based on the Prime Rate. Annual fees range from $0 - $300.