Tuition 101
The key to paying for college is planning ahead, experts say.
Parents who want their kids to have a spot in a Cathedral of Learning classroom should start planning now.
By now, most Peters Township-area seniors know where they’re going to college. In many cases, they’ve already chosen their majors. All that’s left now is to meet their new roommates.
But what about the one thing making all of this possible – money? Parents of recent or soon-to-be high school graduates are seeing green, but not from envy, they’re envisioning all the money it’s going to cost to send their child to college. If they’ve planned well, green should also be the color of their children’s college funds.
“If the student has visions of higher education in the future, the best advice is for families to start saving to the degree they are able as early as possible,” says Betsy Porter, director of financial aid at University of Pittsburgh.
Last year, 85 percent of Peters Township students moved on to four-year universities. Five percent attended two-year colleges while 10 percent went off to the military or into the workforce. For those heading off to college this year, the news is both good and bad.
The bad news: education expenses are not limited to tuition. They also include residency or commuting costs, books, supplies and personal expenses. The good news: in January of their high school senior year, students can start applying for financial aid, which can allow students to attend college they might not otherwise be able to afford.
“Do not be scared by a big ticket price,” says Michelle Vettorel, director of financial aid at Washington and Jefferson College. “When looking at colleges, you apply to a safety school, a high-risk school, and a middle choice. You should do the same for financial aid.”
Signs scattered through the halls of Peters Township High School read “Gold-Diggers Welcome.” The signs direct students to the school’s Career Resource Center, a one-stop shop for all things financial aid, including scholarships. Here Melissa Markowski, Peters Township High School guidance counselor, urges all students to fill out financial aid applications as soon as they return from holiday break. The application is used to determine eligibility for federal financial aid, including grants, loans, and work-study programs.
The student’s financial information is entered into a formula that determines how much his or her family is expected to contribute. Each school takes its cost of attendance and subtracts the family contribution to determine a student’s financial need.
The final step is a student aid report, which includes a summary of the student’s financial aid information and is forwarded to schools of the student’s choosing. The selected schools use this information to determine what financial aid packages to award.
Knowing that this kind of help is available is one thing. Sitting down to fill out all the forms for financial aid, grants and scholarships is another.
“Some people aren’t willing to spend the time,” Markowski says.
But if students and parents alike can bring themselves to face the forms, their work will open the doors to almost any university. And online filing for federal financial aid and other internet resources make obtaining a loan or applying for a grant easier than ever.
“The process is less cumbersome than it used to be,” Porter says.
A helpful tool available to students is the Pennsylvania Higher Education Assistance Agency, or PHEAA, which administers several post-secondary student financial aid programs. PHEAA hands out the Pennsylvania state grants and has a loan servicing operation. The agency is listed by the U.S. Department of Education as having one of the lowest default rates among all major guarantors through highly successful default prevention initiatives. Parents and students can find financial aid help at www.pheaa.org.
For those preparing for future college costs, financial planner Patricia Lampert suggests parents consider a 529 Plan or the Coverdell Education IRA, both tax-free earnings accounts. Parents can convert certain bonds received as gifts into 529 contributions so that future earnings are tax-free.
“Although each state has adopted a different mutual fund company as its trustee with subtle differences, the setup is not difficult at all,” she says. “It’s as easy as setting up an IRA account.”
Another option is moving money from the minor’s accounts set up for education purposes to a 529 Plan. Lampert also urges parents to budget a small portion of their take-home pay and direct deposit it to a 529 Plan, Education IRA or savings account earmarked for education.
“More importantly, just put something away, even if you have to put it in a regular account and use it as your emergency fund as well,” she says. “Just start saving. Instead of spending money on unnecessary or frivolous items that our kids are constantly begging for, why not put $50 to $100 away monthly for their education?”
“If you don’t start saving for education today, you’ll most likely create a collision course during those years where you need to pay for college and are trying to retire or prepare for retirement.
Lampert also suggests parents visit www.collegesavings.com and refer to its comparative charts detailing state taxation and expense ratios
One money move most financial advisors will tell clients to avoid is borrowing against a 401K, as it almost always jeopardizes future earnings. W&J’s Vettorel also urges parents to stay away from lenders who solicit them unwarranted.
“So many people approach me and ask who these people are and how they got their names,” she says.
During the countdown to college, families should remember they are different from all others. Each has its own unique financial situation and, therefore, should have its own individualized financial plan. Most approaches to paying for college do start the same, though, with simply saving. •
|
