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Financing Your Child's Education

Learn about the challenge of college costs, available resources, and strategies to accumulate assets for your child's education. Explore financing alternatives, pitfalls to avoid, and the formula for success.

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Financing Your Child's Education

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  1. Financing Your Child's Education Jennifer Abel Extension Agent Virginia Cooperative Extension Family Financial Freedom Series

  2. Objectives • Appreciate the challenge of paying for college • Understand resources and programs available to help • Commit to accumulating knowledge and assets for financing your child’s higher education NOW Family Financial Freedom Series

  3. Agenda • First Principles • College Financing Alternatives • Formula for Success • Pitfalls to Avoid • Question and Answers Family Financial Freedom Series

  4. First Principles --the BAD news • College is expensive • Many Costs: Tuition, Fees, Room & Board,Transportation, Books….. • Example: for a child now in 4th grade, starting college in 2010, the estimated total cost will be…. • Public school: over $79000 • Private school: over $165000 (source: T. Rowe Price) • Costs rising faster than inflation • Many parents are overwhelmed by the figures Family Financial Freedom Series

  5. Exhibit A: Projected Total Four Year Costs of Attending College Years Until Student Begins College School Year (Fall) Public College Private College Savings Factor (8%) Monthly Investment Factor 1 2001 $51,312 $112,896 1.08   12.53 2 2002   53,877   118,541 1.17   26.11 3 2003   56,571   124,468 1.26   40.81 4 2004   59,400   130,692 1.36   56.73 5 2005   62,370   137,226 1.47   73.97 6 2006   65,488   144,088 1.59   92.64 7 2007   68,762   151,292 1.71 112.86 8 2008   72,201  158,857 1.85 134.76 9 2009   75,811   166,799 2.00 158.48 10 2010   79,601   175,139 2.16 184.17 11 2011   83,581   183,896 2.33 211.98 12 2012   87,760   193,091 2.52 242.11 13 2013   92,148   202,746 2.72 274.74 14 2014   96,756   212,883 2.94 310.08 15 2015 101,593   223,527 3.17 348.35 16 2016 106,673   234,704 3.43 389.79 17 2017 112,007   246,439 3.70 434.68 18 2018 117,607   258,761 4.00 483.29 Examples (T. Rowe Price, 2000) Family Financial Freedom Series

  6. First Principles: the GOOD news • At least some Financial Aid is often available, particularly if you take the necessary steps • If you start planning now, you can accumulate quite a bit by the time the child enters college • If you are creative, the costs can be significantly lower than the averages just stated Family Financial Freedom Series

  7. Savings Grants Scholar-ships Work Military Loans Cost Savings Invest-ments Co-op College Financing Alternatives • A variety of sources of help • Look at both resources AND costs • Piece together total solution Family Financial Freedom Series

  8. Spectrum of resources Grants/Scholarships College Loans Savings Most Desirable Work options Less Desirable Investments Gifts Other Loans 529 plans See handout for details Family Financial Freedom Series

  9. Cost Reduction Strategies • In-State Public vs. Out of State/Private School • Community College for portion of degree • Have student live at home • Take higher credit load and graduate faster • Buy used textbooks and computers • …… Family Financial Freedom Series

  10. Formula for Success • Start saving and investing NOW • Identify appropriate approach • Program type (e.g. 529 plan, UTGA) • Investment type (e.g. stocks, savings bonds) • The longer the time period, the LESS risky stocks and bonds are as an investment for college • BUT, reduce exposure as college gets closer • Consider cost reduction strategies Family Financial Freedom Series

  11. Pitfalls to Avoid • Doing nothing • Time will become your enemy, not your friend • Assuming that substantial aid will be available • Can’t predict the future landscape • Scholarship scams • If it seems too good to be true, it probably is Family Financial Freedom Series

  12. Summary • You can make substantial progress towards realizing your dreams for your child’s future! • There are lots of resources and creative strategies to be explored • Start planning, educating yourself, and saving/investing NOW Family Financial Freedom Series

  13. Where to Get More Information • See handout • VA Cooperative Extension Financial Counseling Program • For goal setting and further exploration of alternatives • Many other resources on Internet • High school guidance/career offices • For info on financial aid application process, forms, etc. • Financial planning professionals • For specific investment advice Family Financial Freedom Series

  14. Questions and Answers • On presentation? • On handout materials? • On your personal situation? Family Financial Freedom Series

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