How Financial Planning Shapes Long-Term College Success

The constantly increasing college expenses are becoming a major burden for US families. When you consider the accommodation, tuition, and board, these costs tend to add up rather fast.

“Things get even worse if you get an unfavorable loan,” warns college admissions consultant from H&C Education Consulting. “Just having to worry about the long-term ramifications of getting a college loan can be extremely overwhelming. 

The good news is that you can alleviate some of the burden through careful planning. Whether you’re preparing funds for yourself or your child, there are numerous tricks you can implement to ensure long-term college success. 

6 Things to Keep in Mind

Given the high costs of studying, the process of securing finances for college starts as soon as a child is born. A family should join resources to save money, find the best loans, and seek additional aid. 

It’s Never Late

The fact that you haven’t saved any money in the first 15 years of your child’s life doesn’t mean you won’t get there. Of course, saving early is much better as it will allow you to accrue compound interest on your money. Even small monthly savings can grow over time, ensuring you don’t need as big of a loan later on.

Make sure your kids understand the importance of saving for college. It isn’t a bad idea to involve them in the process and ask them to contribute. That way, not only will you accumulate more funds, but they’ll be more serious about their studies when they come around.

Find the Right Savings Instrument 

Some financial instruments offer major advantages for college savings. Some of them are even sponsored by the federal or state governments, and come with a tax-free clause. We recommend that you consult with a college advisor regarding different types of aid and financial vehicles.

For example, you should inquire about FAFSA, or Free Application for Federal Student Aid. By using this application, you’ll be able to get research grants, scholarships, loans, and work-study assistance. Don’t get ahead of yourself regarding eligibility, as these things change all the time. 

Use Tax Breaks

As mentioned, the US government supports higher education wholeheartedly. This can be best noticed through certain tax breaks your family might get. Lifetime Learning Credit and American Opportunity Tax Credit, in particular, are tailor-made for students, reducing your debt when filing your tax return. 

However, this type of assistance doesn’t come easily. You must keep records of your college fees, tuition, and course material to be eligible for a refund. In this particular case, we recommend working with a tax expert, as this is their field of expertise. 

Be Realistic

Every parent would love to send their kids to the best colleges in the country. But getting ahead of yourself with loans usually backfires. Before negotiating with a financial institution, you must understand your credit score. You must also make a realistic assessment as to how much money you can save each month.

While investing in school and taking on a massive loan sounds great, you must also consider if this money could be put to better use. For example, you can use your financial resources to buy your kid a new home or save for your own retirement. If you think you can’t take the whole burden yourself, encourage your child to get a part-time job.

Find a Customized Solution

Often, finding an optimal college is much better than paying for the most expensive one. Although Ivy League schools give your child much better opportunities in life, that doesn’t mean this is the best solution for them. Community colleges, for example, are a great stepping stone, allowing your child to transfer after getting a bachelor’s degree.

You should take into account all available options, including online programs and trade schools. Studying abroad might also be a solid option, as these schools are generally cheaper and you’ll need to spend way less money on housing. 

Create a Budget on Time 

Creating a breakdown of all future costs, as well as your current/potential assets, will make it easier to find a properly priced school. Like when you would create a business plan, it is much better to be conservative and make yourself some wiggle room.

Make sure your kid is involved in the whole process. Not only will this make them more invested in future studies, but it will also teach them a few valuable financial lessons. Furthermore, this will face them with the harsh reality of expensive student loans. 

How to Save Money the Smart Way

Although the big picture is important, you must also think about all the small things you have to do over the years. Here are a few tricks that will make it easier to save money and reduce reliance on last-minute college loans:

• Track all your expenses over the years. Try to save money on small and big things. Scratch irrelevant expenses from the list to make even bigger savings.
• There are a lot of college savings calculators you can use. Similarly, you can use a loan repayment calculator to figure out how much money you’ll owe.
• Consistency is key. Ideally, you should set up automatic transfers so you don’t have to worry whether you’ve saved enough money for a particular month.
• Hiring a college consultant is one of the smartest things you can do. These experts are well-versed in different financial vehicles and college aids. In most cases, they pay off for themselves while helping your child get to the school they want. 
• You and your child have to be on the same page. First, ask them about their long-term goals, whether we’re talking about school or work. Ask them to contribute to the college fund, as this will affect their future. 

Last Tricks for College Success

Getting ready for college is a long and arduous process. However, with timely planning, you’ll make it much easier. Furthermore, creating an actionable plan will ensure you don’t have to spend as much money on a loan.