Funding a college education can be one of the biggest financial goals for a family, and it often requires a comprehensive approach.
Families may benefit by having a plan that incorporates a financial and savings strategy with a 529 plan as the centerpiece, as well as a focused plan to execute throughout the high school years.
Considering the recent Supreme Court ruling against student loan forgiveness proposals, it becomes more important than ever for families to have a savings strategy. In this environment, many families may seek out tax-advantaged accounts like 529 plans to cover more of the costs of college. See more about the advantages of a 529 plan in our recent post, “SCOTUS ruling on loan forgiveness underscores need to save.”
Four-year action plan
A pillar of this comprehensive plan for college is to include an action plan to be executed throughout the four years of high school, leading up to the final college decision.
No matter which year of high school your child is starting this year, if college is a future goal, there are actions they can take now to help stay on track.
In fact, the high school years play a critical role in preparing college-bound students for the application process and ultimately choosing a college.
Parents have their own tasks. While many have set up college funding and have savings well underway, the four years of high school are more focused on finances as student aid applications are due and college choices are considered.
Consider following our “Four-year action plan to prepare for college.”
Here are some highlights:
Freshman year
Priorities for parents
- Increase saving in a 529 plan. Encourage grandparents and other family members to get involved
- Help students allocate a certain percentage of their summer job earnings for college expenses
- Consider additional accounts such as custodial UGMA/UTMA for covering non-qualified college expenses such as transportation
Actions for students
- Set goals to achieve a solid GPA throughout high school
- Get involved in extracurricular activities
Sophomore year
Priorities for parents
- Review asset allocation within college savings accounts to ensure that the investments are appropriate with the time horizon remaining before withdrawals for college begin
- Fund a Roth IRA for students who have earnings from employment
- Consider tax-smart strategies and the impact of income on federal aid. Beginning with next year’s tax return, all income will be considered in the aid calculation
Actions for students
- Begin standardized testing with the PSAT in October
- Consider including Advanced Placement courses in class schedules
- Start researching colleges
Junior year
Priorities for parents
- Explore the Federal Student Aid Estimator on the FAFSA website
- Start compiling information for the FAFSA submission
- Research whether target colleges require the College Scholarship Service Profile (CSS Profile) application
Actions for students
- Keep a calendar of standardized tests during the year and consider taking a prep course
- Start building a resume of employment, internships, and achievements
- Meet with teachers, coaches, or mentors to request letters of recommendation
- Research colleges and attend college fairs
- Begin college visits in the fall
Senior year
Priorities for parents
- Make sure you have enough liquid assets for college expenses and identify which accounts to tap into first for them
- Research tax credits for college including the American Opportunity Tax Credit (AOTC) and the Lifetime Learning Credit (LLC)
- Financial aid: Attend a college aid workshop or meet with a professional college counselor
- Complete the FAFSA form, which is available on October 1
Actions for students
- Take the SAT/ACT in the fall
- Review social media accounts and profiles; create a LinkedIn profile to establish a professional presence
- Start working on the Common Application and essay over the summer prior to senior year
- Research application options, including early decision and rolling admissions
- Research and apply for local scholarships
- Schedule campus visits and interviews
Before you begin the planning process: Discuss future dreams
It’s important for parents and students to have an in-depth and honest discussion on whether college is the right path for the student. Sometimes families assume their children will want to pursue advanced education through a traditional college or university. But they actually may have dreams about careers that involve different educational paths, including many trades and arts. If a family defaults into saving for a traditional four-year college program, they may be incurring costs and taking on loans they don’t need.
Families should also make note that 529 funds can be used for qualified trade schools and other institutions/educational providers that are not traditional colleges.
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