The end of summer is upon us again, and with that, the start of the new school year. Take time over the next couple days to consider the students in your life and the cost of their education. We spend nearly as much time assisting our clients with college planning as we do assisting them with retirement planning. That speaks to the size and importance of saving for college. We would like to highlight a few important topics we help our clients with as they manage the financial burden of education:
Make regular contributions to a 529 plan. Or make irregular contributions, or consider other methods to save for college. Above all, set aside savings! Tuition costs for most colleges will far exceed what most people can pay out of pocket.
Grandparents can and should consider making gifts to help with the cost of college. There are a few ways to do this depending on the wishes and expectations of parents and grandparents. We're happy to discuss the different approaches.
A 529 will play at least some role in most college savings plans. Morningstar gives its gold medal to two plans: Utah and Michigan (both direct-sold plans). We've long recommended the Illinois plan, which remains a compelling, low-cost option despite a recent downgrade. The full list of medalists can be viewed here (no subscription or registration required.) If you don't live in Utah, Michigan, or Illinois, you can still invest in those plans, though you may be better off investing in your home state if it offers tax benefits.
The sticker price for college tuition is rarely what students actually pay. The process for awarding financial aid is very strategic on the part of colleges -- particularly private schools -- as administrators try to walk the line between enrolling a good class and paying the bills. We can provide insight on where a proposed financial aid package ranks relative to similarly-situated students at that school. We can also provide an estimate of what to expect in the way of financial aid from other schools your student may be considering.