College Planning

College costs have risen rapidly over the years, and students, as well as their parents, may wonder whether the return on “investment” is worth the expense. A recent study conducted by Princeton University researchers has concluded that for each year of education completed, from grade school through graduate school, an individual’s lifetime earnings can be increased by 16%. In addition, a revolution has occurred in the workplace that requires Americans to have more education and greater skills. Technology has advanced to the point where, in order to keep up in the competitive job market, individuals require as much education and training as possible.

So, the bottom line is “Yes!”—a college education is definitely worth the expense. Planning early for accumulating the necessary funds is the smartest step in the right direction—toward the portal of higher education, and a more competitive edge.

How to fund a college education

Whether you are considering a public or private college for your child, it is essential that your planning begin as early as possible. Many parents procrastinate because they feel overwhelmed by the task, or they think that saving the required amount of money will force them to severely compromise their current lifestyle. While both of these concerns are legitimate, they need not get in the way of establishing—and maintaining—an effective college funding plan.

To start developing a plan, consider your available funding options:

o Scholarships
While scholarships are certainly desirable, there is no way to guarantee your child will qualify for an award. Counting on getting a scholarship is similar to counting on winning a lottery—there are far more nonqualifiers than winners.

o Financial Aid
 Usually in the form of loans, financial aid rarely covers all college costs. Even if you qualify on a “needs” basis, there is no assurance the college of your choice will be able to help all those in need.

o Personal Income
Procrastinators generally expect to fund college expenses from current income. Would you be able to pay the current cost for one year (over $24,000 at many private colleges) out of your present personal income?

o Personal Loans
While generally available, they could prove costly over the long run when total interest charges are considered.

o Savings.
This is the one funding option over which you have complete control. While it may not be easy for a young family to save, even small amounts have the potential to grow substantially through the effects of time and compounding. The longer you wait, the more difficult it may be to reach your funding goal.

Because of the uncertainty surrounding all funding options except savings, many consider personal savings the cornerstone of their college funding program. A disciplined, long-term approach can help you build the resources you’ll need to meet the rising costs of education.

Start saving today!

-Jared

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