Each year, the College Board releases its annual Trends in College Pricing report that highlights current college costs and trends. While costs can vary significantly depending on the region and college, the College Board publishes average cost figures, which are based on a survey of nearly 4,000 colleges across the country.
Following are cost highlights for the 2019-2020 academic year.1 Note that “total cost of attendance” figures include direct billed costs for tuition, fees, room, and board, plus a sum for indirect costs that includes books, transportation, and personal expenses, which will vary by student.
Families were able to begin filing the 2020-2021 FAFSA (Free Application for Federal Student Aid) on October 1, 2019. The earlier timeline was instituted a few years ago to better align the financial aid process with the college admissions process and to give parents information about their child’s aid eligibility earlier in the process.
The 2020-2021 FAFSA relies on income information from your 2018 federal income tax return and current asset information. Your income is the biggest factor in determining financial aid eligibility. A detailed analysis of the federal aid formula is beyond the scope of this article, but generally here’s how it works:2
The result is a figure known as your expected family contribution, or EFC. Your EFC remains constant, no matter which college your child attends. Your EFC is not the same as your child’s financial need. To calculate financial need, subtract your EFC from the cost at a specific college. Because costs vary at each college, your child’s financial need will vary depending on the cost of a particular college.
One thing to keep in mind: Just because your child has financial need doesn’t automatically mean that colleges will meet 100% of that need. In fact, it’s not uncommon for colleges to meet only a portion of it. In this case, you’ll have to make up the gap, in addition to paying your EFC.
To get an estimate ahead of time of what your out-of-pocket costs might be at various colleges, run the net price calculator on each college’s website. A net price calculator asks for income, asset, and general family information and provides an estimate of grant aid at that particular college. The cost of the school minus this grant aid equals your estimated net price, hence the name “net price calculator.”
Behind the scenes, a stealth change in the FAFSA has been quietly and negatively impacting families. The asset protection allowance, which lets parents shield a certain amount of their assets from consideration (in addition to the assets listed above that are already shielded), has been steadily declining for years, resulting in higher EFCs. Fifteen years ago, the asset protection allowance for a 48-year-old married parent with a child about to enter college was $40,500. For 2020-2021, that same allowance is $6,000, resulting in a $1,946 decrease in a student’s aid eligibility ($40,500 – $6,000 x 5.64%).3
Student loan debt continues to grow and student debt is now the second-highest consumer debt category, ahead of both credit cards and auto loans and behind only mortgage debt.4 About 65% of U.S. college seniors who graduated in 2018 had student debt, owing an average of $29,200.5 And it’s not just students who are borrowing. Parents are borrowing, too. There are approximately 15 million student loan borrowers age 40 and older, and this demographic accounts for almost 40% of all student loan debt.6
In a recent study conducted by the ‘National Retail Federation and Prosper Insights and Analytics’, it was found that the average American family will spend just south of $700 for back-to-school costs in 2019. Is your child soon to be a college student? The same survey reported you should be ready to spend a little less than $1,000 alone for start-up school supplies. While this cost seems large, it’s just a part of your financial portfolio. Back-to-school time is not only a great time to plan a scholastic budget, but also reviewing and reassessing your financial plan. Below is your Official 2019 Back-To-School Financial Guide to make sure your student, and your financial goals, stay on track:
How has your year progressed in terms of finances? Have you met or succeeded in your goals? Developing a spreadsheet and comparing where you were at the beginning of the year to where you are now can help you asses how aligned you are with your financial goals. Building this report toward the latter of the year will also give you time to adjust your plan (if needed), throughout the remainder of 2019.
Life happens, which is why insurance was invented. Whether you want to provide for your family in case of an emergency or someone forgets to turn off the stove…again; insurance of all sorts can help cushion the blows to your wallet and financial well-being. However, just as life is always changing, so too are your insurance needs and costs. Once a year, you should reevaluate your insurance needs and coverage for any change. While you may not be able to change health insurance in the middle of the year, items like car and home can be changed with a little research and not much effort.
Regardless if you are married, single, with or without dependents, it is crucial to create and maintain a workable budget. Life changes on a regular basis and your budget must coincide with your current income, needs wants, and goals. Back-to-school time is an ideal time to revisit your budget. It’s a relatively slow time on the tail end of summer travels and on the steps leading up to the holiday season. Budgets should be regularly checked throughout the year and especially after any life changes like marriage, death, education, etc.
Now is the best time to make sure you are receiving the most tax breaks you can on income for 2019. Items like 401(k), charitable contributions, and retirement contributions are all fantastic ways to reduce your tax liability. Consider boosting certain contributions to reduce what you’ll pay in taxes. While ‘tax season’ is still months away, it’s important to start looking at your 2019 year from a financial perspective and start looking out other ways to save on taxes before years end.
Back-to-school season signifies the approach of cooler weather, the quick onset of school costs, and the ultimate approach of years end. Make sure you have a great start to 2020 and finish off 2019 by utilizing this guide when looking at the remainder of your financial year. Although these are good recommendations to start with, you should connect with a financial professional to see where you are on your financial journey and how these tips could benefit you.
For those who are looking for financial advice, we realize the available options are many and deciding who to work with is a challenging problem. At SeaCure Advisors, we know that it is your retirement, and you should have control over it. We offer our experience and knowledge to help you design a custom strategy for financial independence. Contact us today to schedule an introductory meeting!
Disclosure: This information is provided as general information and is not intended to be specific financial guidance. Before you make any decisions regarding your personal financial situation, you should consult a financial or tax professional to discuss your individual circumstances and objectives.
The post Back To School Financial Guide For 2019 appeared first on Adult Financial Education Services.
When your child first started school, you doled out the change for milk and a snack on a daily basis. But now that your kindergartner has grown up, it’s time for you to make sure that your child has enough financial knowledge to manage money at college.
Perhaps your child already understands the basics of budgeting from having to handle an allowance or wages from a part-time job during high school. But now that your child is in college, he or she may need to draft a “real world” budget, especially if he or she lives off-campus and is responsible for paying for rent and utilities. Here are some ways you can help your child plan and stick to a realistic budget:
You should also help your child understand that a budget should remain flexible; as financial goals change, a budget must change to accommodate them. Still, your child’s ultimate goal is to make sure that what goes out is always less than what comes in.
For the sake of convenience, your child may want to open a checking account near the college; doing so may also reduce transaction fees (e.g. automated teller machine (ATM) fees). Ideally, a checking account should require no minimum balance and allow unlimited free checking; short of that, look for an account with these features:
To avoid bouncing checks, it’s essential to keep accurate records, especially of ATM or debit card usage. Show your child how to balance a checkbook on a regular (monthly) basis. Most checking account statements provide instructions on how to do this.
Encourage your child to open a savings account too, especially if he or she has a part-time job during the school year or summer. Your child should save any income that doesn’t have to be put towards college expenses. After all, there is life after college, and while it may seem inconceivable to a college freshman, he or she may one day want to buy a new car or a home.
If your child is age 21 or older, he or she may be able to independently obtain a credit card. But if your child is younger, the credit card company will require you, or another adult, to cosign the credit card application, unless your child can prove that he or she has the financial resources to repay the credit card debt. A credit card can provide security in a financial emergency and, if used properly, can help your child build a good credit history. But the temptation to use a credit card can be seductive, and it’s not uncommon for students to find themselves over their heads in debt before they’ve declared their majors. Unfortunately, a poor credit history can make it difficult for your child to rent an apartment, get a car loan, or even find a job for years after earning a degree. And if you’ve cosigned your child’s credit card application, you’ll be on the hook for your child’s unpaid credit card debt, and your own credit history could suffer.
Here are some tips to help your child learn to use credit responsibly:
Finally, remind your child that life after college often involves student loan payments and maybe even car or mortgage payments. The less debt your child graduates with, the better off he or she will be. When it comes to the plastic variety, extra credit is the last thing a college student wants to accumulate!