Almost every day you hear discouraging stories of the ever-higher costs of higher education, but it is usually a wise investment. The U.S. Census Bureau says males with a college degree earn 80 percent more than male high school grads and female college graduates earn more than twice as much as women with only a high school degree.
Start early with a clearly spelled-out goal. Studies prove people with very specific goals consistently outperform those who are simply trying to “do their best.” Goals should be 1) specific, 2) measurable, and 3) have a definite time frame. Some goals may be short term, others—like the recent voyage of New Horizons past Pluto—may extend for years. For example, your goal might be to have $30,000 in college savings by 2020.
Tax-advantaged College Savings
One way to save is through 529 plans that grow tax-deferred and are tax-free when used for qualified post-secondary education. Parents, grandparents and others may contribute to a 529 savings plan which are administered by states, but often may pay for out-of-state olleges.
Virginia, for instance, offers plans including Virginia529 inVEST, CollegeAmerica, CollegeWealth, and Virginia529 prePAID. Each has specific benefits. For details, visit: www.virginia529.com.
There are other Federal tax advantages as well. In some cases, these benefits are phased out for higher incomes and have specific requirements for students. For full information visit: www.irs.gov.
For example, the American Opportunity Tax Credit, available through 2017, lets parents claim tax credits for all of the first $2,000 and 25 percent of the next $2,000 of a child’s tuition and mandatory fees, up to $2,500 per child annually. It may be used for four years of post-secondary education for a student taking at least half the normal course load.
The Lifetime Learning Credit allows taxpayers to claim a tax credit for 20 percent of up to $10,000 of tuition and mandatory fees for themselves, their spouses, and dependents. There are certain restrictions, but no requirement to be studying towards a degree or be enrolled at least half-time, nor is there a limit on how many years the credit may be taken. In many cases, up to $2500 in student-loan interest is deductible.
Other Ways To Save
It’s important for students to be committed to the college savings project. Have a family meeting to discuss very specifically the amount of money that is realistic to save and what portion the student should earn. One family, for example, requires their children to contribute an increasing percentage of earnings and birthday money toward college savings starting when they become teenagers.
Dual enrollment is an excellent path for qualified high schoolers to earn credit for college courses from accredited colleges such as PVCC while still in high school. In Virginia, many community college courses are specifically designed to be entirely transferrable to other state schools. In some cases there is no charge for college tuition while in high school.
In some cases, employers will cover some or even all tuition costs. Antonio, a Charlottesville High School grad, attended PVCC while working full time. He received some scholarship aid and his employer helped with tuition aid and flexible hours. Last year he was admitted to the second year of a prestigious three-year program at VCU.
Sources Of Income And Financial Aid
Explore the likelihood of scholarships or grants and whether there are tactics to maximize these tuition sources. Most grants and scholarships are tax-free, unless the student must provide work or services. Some are based on financial need, some on merit perhaps in a particular field, some are for athletics.
Prospective students should complete the online Free Application for Federal Student Aid (FARFSA) even if they don’t know whether they’ll qualify for any grants, loans, or work-study money. Forms should be completed as close to January first as possible, since most college scholarship offices have a finite budget and the earliest applicants are most likely to receive aid. Some aid is limited and once it’s dispersed, it’s gone.
The ideal financial aid, of course, comes as grants and scholarships that don’t need to be repaid. Some awards are by organizations to specific students with no requirements to attend a specific college. Others may be given by donors through the scholarship office of a particular school and have very narrow specifications such as a student of Swedish descent who plays the tuba.
Research is well worth the time the parents and students spend on it. High school officers may also be good sources of information. For lots more suggestions, cautions, and listings of scholarships, visit: www.fastweb.com.
Some students find part-time work during college, however, it’s important to gauge just how much the work detracts from studies. Sara, a nursing student, sold plasma every few weeks for several years, but was able to spend the time studying while the plasma was being processed.
Your strategy today directly affects the funds you’ll have ready for tuition and other expenses in the future. For more detailed information, visit websites, talk to families with members in college right now, or consult with your financial advisor.
By Marilyn Pribus
Marilyn Pribus and her husband live in Albemarle County near Charlottesville. They both worked full-time during the summers and part-time during the college year.