Late Stage College Planning

“Help! My child is two years away from college and we haven’t saved much. What should we do?”

Your late start means you’ve missed most of the best opportunities to grow the money you have. With only two years until your child starts college, you’ll need to refine the college selection process, accumulate enough of a down payment for the early college bills, and establish a savings plan for the later college years. Here are some constructive steps you can take.

School search

First, help your child investigate schools that provide good value. Some less expensive state universities and second-tier private colleges may offer better programs than their more expensive private counterparts. Think creatively. Your child could attend a nearby school and live at home for a year or two to save money on room and board. He or she could attend a community college for two years and then transfer to a private four-year college. Or, your child could consider cooperative education, where semesters of academic work alternate with semesters of paid work. If your finances are severely limited, your child might consider taking a year off before starting college.

Financial aid

Second, learn all you can about financial aid. Do a dry run through the federal government’s financial aid application to determine whether your child is likely to qualify for financial aid, and, if so, for how much. When you’ve zeroed in on a few colleges, examine their financial aid statistics. For example, what percentage of students receive financial aid? What percentage of the average package consists of loans? What percentage of a student’s financial need is generally met — 100%? 75%? Does the college offer merit scholarships? Use a net price calculator on a college’s website to get an idea of how much grant or scholarship aid your child might receive at a particular college based on your financial information.

Private Scholarships

Third, start investigating potential scholarships. There are a number of websites where your child can type in his or her interests, abilities, and goals to obtain a list of relevant scholarships. FastWeb is free and excellent.

However, outside scholarships generally make up only a small portion of a student’s overall aid package, and the process can be very competitive. So don’t make the mistake of thinking that a private scholarship will magically cover most of your child’s college expenses. It’s important that this search is made in addition to, not in place of, the quest for federal and college-sponsored financial aid.

Savings and Investments

Fourth, examine any current financial resources that you can draw on for the early college bills. Do you have savings accounts, stocks, mutual funds, or cash value life insurance? Can you pay a portion of the tuition bills from current income? Can you increase the family income by getting a second job or having a previously stay-at-home spouse return to the workforce? If you’re still short, you’ll need to investigate a personal loan, home equity loan, or Federal Parent PLUS Loan. In other cases, you may need to tap your retirement accounts, though this is generally recommended only as a last resort.

Cash Flow

Finally, you’ll need to start earmarking as much of your current income as you can for college bills that will come due in four or five years when your child is junior or senior in college. Because you’ll need the money relatively soon, you should avoid high-risk investments. Instead, choose a low-risk, stable investment, such as a certificate of deposit that is timed to mature when you need it, or a money market mutual fund.

Have A Plan

This process is complex and timing is critical. Often, families don’t have the bandwidth or resources by themselves to do the work necessary to ensure their college plan is right for them. If this sounds familiar, you aren’t alone. Many families with high school sophomores, juniors, and seniors are in the same situation. Help is available.

Speak to a college financial planner who has specific experience in the college planning space and has them review your plan and options. You can book a complimentary personal consultation with SeaCure here.