According to the College Board in 2017, the average debt per graduating student with a 4 year degree from a public school was $27,000. Future graduates are likely to have even a larger debt burden as inflation for college tuition continues to outpace core inflation in the U.S. by nearly 4%. The long term consequence? Graduating with a large amount of student debt can reduce your son or daughter's ability to save for retirement throughout their career by an average $325,000*.
Helping your children pay for the cost of college does not have to be a daunting experience. If you get started early and consider the various sources of financial aid then you can help your student start their career debt free.
1. Think Long-Term College Savings. The earlier you start saving, the better off you'll be. One of the best methods is to combine tax benefits and savings by investing in a 529 Plan. There are two types of plans: Prepaid Tuition Plans and College Savings Plans. You can choose any state sponsored plan, however, if you choose an Illinois plan, you receive an added tax break by deducting part of your contribution from state tax. The primary benefits of a 529 plan are earnings will grow tax free when used for college, ability to transfer funds from one family member to another, and ability to choose your investment in attempts to outpace college inflation. Other savings plans include a Coverdell (Educational IRA) with lower annual contribution limits of $2,000, Custodial Accounts with less tax benefits, and Personal Savings. No matter how you save, careful planning for the long haul is the best way to prepare for the cost of college.
2. Free College Money. If you're looking for someone else to pay for college then knowing the options and understanding the filing deadlines in this highly competitive marketplace will be the keys to your success. Available options include: 1. Federal and State Grants, 2. Scholarships, 3. Service and Work Study Awards, and 4. Tuition Waivers and Allowances. The first step is to consider if you qualify for "needs-based" or "non-needs based" aid. Start by visiting FASFA (Free Application for Student Aid) at fasfa.ed.gov to determine your Expected Family Contribution (EFC), or what the government thinks you can pay for college. Next, you will receive a Student Aid Report (SAR) to be given to the financial aid center at your prospective college. The main source of free money is the needs-based "Pell Grant" followed by the Supplemental Education Opportunity Grant (SEOG). Next, learn more about Illinois' state grants at www.isbe.net. Scholarships are the next best free source and are usually based on merit or competition. Check with your college and visit sites that do not charge a fee such as fastweb.com, studentaid.ed.gov, fastaid.com, and collegenet.com. There are a lot of scholarship scams on the internet so be careful with the "too good to be true" offers.
3. Alternatives to Loans. Consider alternatives such as deciding which school to attend will keep your costs down. The reality is, unless you are graduating from an Ivy League school, most employers are more interested in your skill sets and less on where you graduated. Consider attending a school close to home to save money on room and board. Also, think about picking a lower cost school and research which classes will transfer to a school of choice then transfer to your ideal school in your senior year. These strategies can save you thousands of dollars. If borrowing is your only option, understand the interest rates and payback options. The best choice for loans is the subsidized needs-based "Perkins" or "Stafford" Loan with lower interest rates than institutional loans.
Learn more about how iLearn Academy can help you save and prepare for college by contacting Mr. Anderson at 847-834-0791. Please be sure and attend our free "Paying for College" workshop at our learning center on March XX, 2018 or call for more information.
*College Board, Trends in Student Aid 2017, read more at: https://trends.collegeboard.org/sites/default/files/2017-trends-student-aid_0.pdf