Thursday, July 26, 2012

College Planning: The Details Part 2

College is a great time to begin budgeting – a skill that will benefit anyone for the rest of their lives. In the first part of this post, we discussed the importance high school graduates preparing for the investment of college before they start. The conventional wisdom that you have to go to college to get a high-paying job is no longer always accurate. As with any financial decision, going to college should include weighing the pros and cons of the cost and reward. If your child has weighed these options and decided that college is the best financial decision, there are many resources to help figure out how to pay for college and how to choose the right school. 

Choosing the Right School
Many high school graduates are attending community college to save money before applying to a four-year university. Community colleges are a great way to reduce cost because it does not matter where you begin college, but where you end. Because of this, you should spend the money on the highest degree. For example, if you plan on getting a Masters degree, you may want to consider going to a more affordable undergraduate school and spend your dollars on a high quality Masters program.

When you’re ready to apply to four-year colleges, consider applying to several in order to compare financial aid packages – and even to use in negotiations. At the same time, though, carefully consider the costs of application. Have a plan.

Paying for College
When determining how to pay for college, Saving for College and College Savings are two good websites to start with. Both provide ways for you to review and compare various 529 plans based on the features that are important to you. Consider plans that allow direct investment (no advisor) and savings plans (not prepaid tuition).

Many students pay for college by combining financial aid, scholarships and loans. However, students should be wary of loans. If a loan is awarded for more than your tuition and books, it’s tempting to use the excess to make life more comfortable, but it adds to the debt burden when you graduate. If you have to rely on loans, it’s best to make interest payments, using income from summer or part-time jobs, on non-subsidized loans whenever possible. As far as financial aid is concerned, every incoming college student should complete the Free Application for Federal Student Aid (FAFSA) as soon as possible, regardless of income or resources. Many scholarships and grants require FAFSA even if they don’t qualify for aid.

When you decide to go to college, you’re making a huge investment in your future. College can be a great time to learn many important life skills, including budgeting.

At Kemp & Associates we’re dedicated to helping your family navigate important financial decisions like how you can plan to pay for a college education and your retirement. We believe in providing personal, professional, and prudent financial planning to each client. Feel free to contact us for more information or to inquire about our services.

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