Graduation season is about to kick into high gear. For the parents of many graduates, it’s a celebration if only because it signals the end of the blood-letting: no more tuition bills. For many graduates, the harshness of real life, and the decade or so of student loan payments are about to begin. It doesn’t have to be this way.
With college tuitions continuing to rise, and the post-collegiate job market as soft as it’s ever been, it’s more important than ever to be sure you have a plan in place for managing the cost of post-secondary education.
Here are some tips:
- Be realistic about your funding goal. There’s undue societal pressure on parents to pay for the full cost of the education of their children. Are you ready to forego your ability to retire on-time, or your lifestyle in retirement, in order to fund college? Have you considered how paying for college is going to impact your other goals? It’s perfectly fine to strike that personal balance between college funding and your retirement, but be sure to do it willingly and deliberately, so there are no surprises in the future.
- Start early. The earlier you start saving, the less you’ll have to save overall. Since your savings should grow over time, your accounts can do more of the heavy lifting if you get them started early. Earmark a portion of your income each week or month, and have it directly deposited to your various college savings vehicles. College costs are rising at 4-6 percent each year, so your savings need to work even harder than you might think.
- Behold: The 529 Plan. Now that you’ve started saving, and you’ve determined how much you’re able to save, you’ll need to put those funds to work somewhere. A 529 Plan can provide tax benefits on your contributions, as well as on withdrawals, when used for qualified education expenses. If you’re a New York resident, be sure you’re using the New York version of the plan, so that you can also receive the tax benefits on your state tax return. Optional age-based investments, within the plan, allow the account to become more conservative as your student ages, so that you can “set it and forget it,” to quote Ron Popeil.
- Be pragmatic about choosing a school. For many teens, the task of choosing a college is grounded more in social pursuits than in the conscious and deliberate conquest of intellectual stimulation through higher education. Unless your child has been sure of a career track since the womb, it’s very likely they have no idea what they want to do for a living. A community college can provide an excellent opportunity for your young student to complete core curriculum classes, mature a bit, and then transfer to a four-year school while saving tens-of-thousands of dollars. The money saved could be put toward a graduate degree.
- Consider the unexpected. It’s not something we like to think about, but it’s important to know that student loans are not forgiven at death. If you are cosigning loans for your children, purchasing a low-cost term insurance policy, in the tragic event of their death, could be an important consideration in order to protect your other assets and help safeguard your future.
- Work with your advisor. Your financial advisor is trained to help you balance your many financial goals. By working with your independent advisor to establish goals, create a funding strategy, monitor progress, and make changes when necessary, you’re going to help position yourself, and your student, for success in the future.
Stephen Kyne is a partner at Sterling Manor Financial, LLC in Saratoga Springs, and is a Registered Representative and Investment Advisory Representative offering securities and investment advisory solely through Cadaret, Grant & Co, Inc., Member FINRA/SIPC. Sterling Manor Financial LLC & Cadaret, Grant are separate entities.
