Whether you have children, grandchildren, nieces or nephews headed to college when they turn 18, it’s always best to put anticipated higher education expenses into your financial plan–the sooner/younger the better.
Call us to discuss. And read here to learn more:
1. FAFSA dates have just changed
For students college-bound in the 2017-2018 school year, there is an important FAFSA date change: the application date was just changed from January 1, 2017 to October 1, 2016—three months earlier. Details here.
Even if you think your family makes too much money to qualify for aid, most experts say you should apply for FAFSA (Free Application for Federal Student Aid) anyway, because colleges, state scholarship agencies, and foundations use the FAFSA when deciding who gets their scholarships, as well as how much each student will receive.
Students already on campus should also apply every year. And remember that school deadlines may be different from FAFSA deadlines.
2. In terms of job prospects, a college degree is more necessary than ever.
According to the Department of Education,“a postsecondary credential has never been more important” because:
• The average bachelor’s degree recipient will earn about $1 million more in their lifetime than those without a postsecondary education.
• By 2020, an estimated two-thirds of job openings will require postsecondary education or training.
• College graduates with a bachelor’s degree typically earn 66% more than those with just a high school diploma and are less likely to face unemployment.
The Wall Street Journal says salaries are rising for new college graduates. “Americans who earned a bachelor’s degree in 2015 landed a job with an average starting salary of $50,651, 5% above the average starting salary for 2014 grads.” Unemployment for recent college grads from 22- to 27-years-old was cited at 4.6% in the article.
3. The cost of a college degree is high…second only to a home mortgage.
It’s no secret that college costs have skyrocketed. “College has never been more expensive…over the last three decades, tuition at four-year colleges has more than doubled, even after adjusting for inflation,” according to the Department of Education.
For the 2015-16 school year, the College Board estimated the average tuition and fees to be $9,410 per year at four-year, in-state public institutions. Room and board was about $10,000 annually. When you total various scenarios, the average cost of a bachelor’s degree ranges from $52,000-$130,000, depending on whether your child attends in-state or out-of-state, public vs. private university, attends community college first, and whether or not they have housing and food provided.
Chart from CollegeBoard.org
In fact, these days, paying for a college education is one of the biggest outlays any family will ever make, after their home mortgage.
Why so much? According to a Center for American Progress report, it was “the Great Recession and resultant state budget cuts that led to the public college tuition hikes which have unduly burdened low- and moderate-income families.”
4. Student debt is the highest in history
Student debt is a $140 billion-a-year industry, with 42 million Americans bearing $1.3 trillion in student debt. The federal government holds 93% of these outstanding student loans, making the Department of Education, in essence, one of the world’s largest banks. The average class of 2016 graduate with a student loan will owe more than $37,172, the highest level of debt yet. Almost 71% of bachelor degree recipients will graduate with a student loan, compared with less than 50% two decades ago.
Wall Street Journal
5. Try NOT to sacrifice retirement for college
A recent survey of parents by HSBC Group found that 98% of U.S. parents are considering a college education for their child—and 60% would be willing to go into debt to fund it. Although parents say this makes it difficult to keep up with other financial commitments, they still think it’s more important than long-term savings or credit card repayment. And 37% of U.S. parents say their children’s education is more important than their own retirement savings.
Commenting on the findings, HSBC’s Global Head of Wealth Management said:
“The financial sacrifices that parents are willing to make to fund their children’s education are proof of the unquestioning support they will give to help them achieve their ambitions. However, parents need to make sure that this financial investment is not made to the detriment of their own future wellbeing.
“By having a financial plan to meet their family’s overall needs and reviewing it regularly, parents will be better placed to support their children’s studies without compromising on their own long-term financial goals.”
A recent segment on CNBC agrees that sacrificing your retirement is not the best decision in the long run, and urges people to plan early: Watch here.
Let’s discuss ways you can plan ahead to fund both college tuition and your retirement. Call us today.