Choosing the Best College
Most college-bound high school seniors will decide what college they will attend next fall by May 1st. While the decision time for those students is close at hand, the process of deciding where to apply to college and how to pay for it can start years in advance. While uncommon, I have talked to couples who start saving in a 529 account even before their first child is born.
As parents, we want the best for our children. That includes helping them choose the best college for them. But how do we decide on the best college? The quality of the education, what your child wants to study, and the overall experience are all relevant when trying to choose the best college. At the same time, college is expensive. After our home, it’s one of the most expensive financial commitments many of us will make. Does paying top dollar for a college education make the most sense for your child? There are many factors to consider. It’s also important to be realistic about what you can afford.
Based on personal experience with our kids, most students start thinking more seriously about college in their sophomore or junior year of high school. Many students and parents start their college search by creating a long list of potential schools. Narrowing that list down isn’t always as fun, but getting the most Return on Life from college requires families to balance dreams and practicalities. Start focusing on your child’s college search by addressing these three important questions with your high schooler.
1. What are my child’s goals?
The student debt crisis and 2020 COVID-19 lockdowns forced many families to reevaluate what college is really for. Yes, parents want their children to gain independence, develop socially, and have some fun. But the price tag associated with those experiences is becoming harder for many families to justify without a clear educational goal.
That doesn’t mean that your 18-year-old should have their entire life mapped out by the time they graduate high school. Multitalented students who are still exploring might look to schools with strong liberal arts programs that will help them focus their interests on a career. On the other hand, if your daughter has been giving her stuffed animals medical attention since preschool, have a conversation to make sure she is certain about investing time and money into what will be a very challenging – and expensive – academic track.
2. What are my child’s Needs and Wants?
The educational goal you determined in step one should also be at the top of both your child’s Needs and Wants for college. Next, discuss the other items that fall into those categories. Be strict about keeping these Needs and Wants separate, even for things that might blur the boundaries.
For example, is going to a large school with Greek life and a great football team a true Need? Or could your daughter see herself flourishing just as well at a smaller school where learning and social life might move at a slower pace?
Does your son Want to go to school in a big city? Or do you both feel like he Needs to expand his horizons and interact with a wider variety of people to mature personally and succeed professionally?
There are no judgments here, no right or wrong answers. The goal is to gain some clarity on what’s most important to your child so that you can match those key characteristics with an ideal school.
3. How are we going to pay for college?
When you were preparing for college, your parents might have called this “The $64,000 Question,” in reference to the old game show. Today, according to recent studies by the Education Data Initiative, figuring out how to pay for a bachelor’s degree could be more like a “$400,000 Question.”
Going to college doesn’t just delay your child’s income-earning by four years or more, it can also deplete savings and create debt. And that’s before weighing in factors external to tuition, such as the cost of textbooks, transportation, and basic living expenses. Outlining these total costs might cause you and your child to look back on those Needs and Wants with a different perspective.
Like any other aspect of your financial plan, the sooner we can anticipate a major transition or expense, the sooner we can start planning for it. When we work with our clients on their financial plans, we include a college spending goal as soon as we can – in some cases we have included that goal before the birth of their first child. With that kind of foresight, we’re able to explore options like 529 accounts that can supplement savings, scholarships, part-time work, and low-interest student loans.
But even if you and your high schooler just had your first-ever conversation about paying for college, your financial plan gives you options. Make an appointment to speak to one of our advisors and we’ll help you get your child the best education possible with the money you have.
Other considerations related to paying for college
If you have any thoughts about borrowing to help pay for college, you should file for financial aid. This means completing the Free Application for Federal Financial Aid (“FAFSA”) annually. This allows you to apply for federal student loans. These are cheaper and safer than private market loans. Schools also use the FAFSA to determine a student’s eligibility for institutional aid. (Please read this blog for some tips on completing the FAFSA.)
When it comes to saving for college, you have several savings options. This blog provides an overview of the different account types you can use to save and some of the pros and cons of each.
If your student has strong credentials, consider having them apply to the honors or scholars program at a state school. This can allow them to get a high-quality education. It should also cost much less than it would for them to attend a more expensive private school. Honors programs are smaller and have more academically driven students when compared to the balance of the student body. Plus, honors students can still draw on the resources of a larger institution. (See this article for some additional thoughts on this topic.)
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I plan on offering a Social Security workshop in May or June. This week’s first article focuses on one of the topics that will be addressed: “Why should I consider waiting until age 70 to start receiving my Social Security benefits?” This week’s first article fits nicely with the opening to this week’s blog. It suggests that we retire (at least some) of the fears we have about running out of money in retirement.
Here are the links to this week’s articles as well as a brief description of each:
1. 3 Reasons to Wait Until 70 to Start Taking Your Social Security Benefits.
Many people don’t have a great understanding of how Social Security benefits work. When speaking to clients and prospects, I often address the advantages associated with waiting to start claiming Social Security benefits. And the longer you wait to start the better – though you can only wait until age 70. Delaying doesn’t mean you have to keep working until age 70 either. The article shares three reasons to delay taking your benefits:
- You’ll get a bigger Social Security check – guaranteed.
- You may be getting Social Security Checks for a long, long time.
- You could help keep your tax bill lower.
The last idea refers to the considerable number of tax planning strategies you can implement during the time before you start claiming benefits. Please note that in May or June I will be offering a Social Security workshop. If you receive this weekly blog in your inbox, you will receive further information in May.
2. How to Be Resilient: 5 Steps to Success When Life Gets Hard.
Common wisdom says stress is bad. According to a study cited in the article, viewing stress as harmful made your chances of death within the next eight years 43% higher. Perhaps even more interesting, those who didn’t view their stress as harmful had an even lower death rate over that same period than those who reported experiencing very little stress. Having a positive vision of stress lowers your chances of depression. It can also leave you more satisfied with your life. You may have more energy and fewer health problems. You could be happier and more productive at work, too. It comes down to mindset. When we have a more positive mindset, stress can make us healthier and more effective. The article also shares some tips to help make you more resilient.
3. The Gender Wage Gap Could Cost Women Millions When They Retire.
As a general rule, women earn less than men. Their earnings can be handicapped by time spent as a caregiver to their children. Women are also more likely to take care of aging parents. Inequities among different groups present in our society also add to this problem. Government data show women earn about $0.83 for every dollar earned by men. That equates to a median annual wage gap of $10,435. During her career, a full-time working woman will miss out on $417,400 of income. Earning less during their working years hurts women in retirement. They save less and receive smaller Social Security checks than men. The problem gets aggravated even more when we factor in that women also have a longer estimated lifespan. Women of color face an even larger wage gap. This causes them to lose out on even more potential savings.
4. The Most Likable People Always Avoid These 13 Communication Mistakes, Say Speech and Words Experts.
Our words matter. They can make a big difference in how others perceive us. According to the research cited in this article, certain words, phrases, and other ways we communicate can prove beneficial. The article goes on to share communication mistakes the most likable people always avoid. It also shares some suggestions that can help. Many of these center on improving your listening skills. For example, we should ask others to elaborate on what they’re saying. We can do this by saying, “That’s interesting. Tell me more!” We often fail to express gratitude. It’s important to say, “Thank you.” Those two small words can carry a lot of weight in relationships.
5. Should You Consider Qualified Charitable Distributions.
In last week’s blog, I said that the ability to make qualified charitable distributions (QCDs) was one reason to consider a 401(k) rollover. QCDs allow you to make a direct transfer from an IRA to a qualified charity. If you already donate to charities, QCDs represent a tax-advantaged way to do so. A QCD can satisfy some or all of your required minimum distribution. You don’t pay tax on the QCD amount. You don’t get an itemized deduction for it on Schedule A of your tax return either. But excluding the QCD amount from income provides a greater benefit than an itemized deduction would. Read this article if you’d like to learn more about QCDs. You’ll also find some helpful tips about them.
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Phil Weiss founded Apprise Wealth Management. He started his financial services career in 1987 working as a tax professional for Deloitte & Touche. For the past 25+ years, he has worked extensively in the areas of financial planning and investment management. Phil is both a CFA charterholder and a CPA.
Located just north of Baltimore, Apprise works with clients face-to-face locally and can also work virtually regardless of location.
