Funding for Higher Education (Part I)
6/7/2004
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Saving for children’s college education today could be one daunting task facing many parents. Statistics published by the nation’s College Board show that today’s average annual cost at private colleges already exceeds $25,000.
With tuition at both private and public universities rising steadily, the projected four-year college cost could be overwhelming for many families in the next 5 to 15 years.
In addition, with many professions nowadays requiring graduate degrees it becomes apparent that fewer and fewer families may be able to cover their children’s education expenses from their current income.
So, what to do about it?
First and foremost, start planning now. Whether your child is very young or approaching college age, it’s never too early or too late to begin planning.
And we will discuss the college funding options in multiple pieces to assist you in achieving your noble goal. (Yes, helping your children to finish higher education is noble and gratifying. Everyone should be able to do it with well-informed planning and actions).
1. Scholarships and Financial Aid.
Scholarships are certainly desirable. But there is no guarantee that your child will qualify for an award. Counting on getting a scholarship without preparing alternatives is not a wise and practical way to go even if your child is an outstanding student.
Financial Aid, on the other hand, usually is in the form of loans and it rarely covers all college costs. Even if one qualifies on a “needs” basis, there is no assurance the university of your choice will be able to help all those in need.
In order to determine who qualifies for financial aid, a formula provided by the federal government subtracts the expected family contribution from the cost of attendance. (To apply for federal and many state financial aid programs, students must complete a Free Application for Federal Student Aid (FAFSA) ).
Among other factors, this formula takes into consideration the assets and income of the parents and child. Because the formula gives much greater weight to the child’s income and assets, if parents are planning to seek financial aid for the child then they should avoid making large gifts to the child
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