Late Stage College Planning

The cost of attending college has historically increased faster than the average household’s income. Although this trend has cooled off in recent decades, the cost of college today is far greater when compared to parent incomes than it was when mom and dad earned their degrees. As a result, many parents now find themselves scrambling to put the kids through school without compromising their retirement.

So, how can parents pay for school without putting their retirement goals at risk?

1. Know your limits

Since most households have limited financial resources, it’s important to understand how much college cost you can afford. In order to solve for this, you’ll need to first understand whether you’re on track for retirement. This will depend on your existing retirement savings, the amount of income you’ll have in retirement, how your retirement assets are invested, etc.

Once you understand how much income you’ll need to save for retirement, you can determine how much of your income (and assets) can reasonably be committed to paying for school. Knowing your limits will give you the insight needed to steer your child’s college application process. It may also motivate you to re-evaluate your retirement goals, should you decide it’s worth delaying retirement to help pay for a higher cost school.

2. Shop wisely

From the parent’s perspective, it’s important to understand how various schools will consider family assets and income when deciding who gets what and how much (in terms of grants, scholarships, etc.). Each school does it differently. In order to find this out, you’ll need to know how each school will calculate your “expected family contribution” i.e., what the school views as how much you can afford to pay, based on your current assets and income.

Once you understand your “expected family contribution” you can research different colleges to gain an understanding of how much they’ve historically awarded based on need and merit. The overall objective being to extract as much value as possible from a college, based on your families situation and goals.

The late-stage college planning process can be complicated. Don’t hesitate to reach out if you’d like to have a complimentary discussion about your current situation.

Thanks for reading!

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