#educationplanning

College is Expensive but Worth It

All those benefits of personal growth, expanded horizons, and increased lifetime earning power comes at a price, a price that increases every year, but we believe a college degree is worth it.

A college education is expensive. For decades, college costs have outpaced annual inflation, and this trend is expected to continue. According to the College Board’s annual Trends in College Pricing Report, for the 2020-2021 academic year, the average cost of attendance at a four-year public college for in-state students is $26,820, the average cost of attendance at a four-year public college for out-of-state students is $43,280, and the average cost of attendance at a four-year private college is $54,880. Many private colleges cost substantially more. The total cost of attendance includes direct billed costs for tuition, fees, room, and board, plus a sum for books, personal expenses, and transportation.

However, a college degree typically provides job security and increased lifetime earning power (see the charts below).1

Keep in mind though, there are different labor market and wage outcomes by the chosen college major. Click here to see those outcomes. This should be an important consideration when helping your child choose which school to attend.

Why You Should Start Saving Early

Next to buying a home, a college education is the largest expenditure most parents will ever make (and perhaps the biggest expenditure when more than one child is in the family picture).

The earlier in the process you become informed about the potential costs and your saving options, the greater chance you will start saving. And the more money you save now, the less money you or your child will need to borrow later.

How much you need to save obviously depends on the estimated cost of college at the time your child is ready to attend. Often, these numbers are staggering. Don’t be discouraged if you can save only a minimal amount at first. The key is to start saving early and consistently and to add to it whenever you can from raises, bonuses, or unexpected gifts. In addition, parents generally supplement their savings at college time with a combination of personal loans, financial aid (student loans, grants, scholarships, and work-study), and tax credits to cover college costs.

After you determine how much you can save each month, you will need to choose one or more college-saving options. There are many possibilities to pay for college — watch our webinar “A Definitive Guide for education Planning” to understand your options with student loans and learn about the best ways to save for college and maximize student aid.

It is never too late to start planning for college and we are here to help you put together a plan.

Prepared by Broadridge Investor Communication Solutions, Inc. Copyright 2021. Edited by BFSG.

  1. Federal Reserve Bank of New York, The Labor Market for Recent College Graduates, February 12, 2021

Disclosure: BFSG does not make any representations or warranties as to the accuracy, timeliness, suitability, completeness, or relevance of any information prepared by any unaffiliated third party, whether linked to BFSG’s web site or blog or incorporated herein and takes no responsibility for any such content. All such information is provided solely for convenience purposes only and all users thereof should be guided accordingly. Please see important disclosure information here.

Superfunding a 529 College Account

529 College Savings Plans are tax-advantaged education-savings accounts.  Federal tax rules allow an account owner to give up to $15,000 a year ($30,000 for married couples) to a child without incurring a gift tax. However, there is a unique provision to employ a “superfunding” strategy by front-loading your 529 contributions without triggering gift taxes. Here’s how superfunding works:

By employing the superfund strategy, you can put six years of contributions ($75,000 for single or $150,000 for a married couple) into your 529 accounts in one year by electing to treat the contribution as if it were made in equal installments over five years.

If you want to use the superfund strategy, in only a few months you can contribute $90,000 ($180,000 for a married couple) to the 529 account tax-free:

  • Make a one-year gift to the beneficiary using the allowance of $15,000 by the end of this tax calendar year (2020).
  • Utilize the 5-year gift allowance of $75,000 at the start of the next tax calendar year (2021).

You would need to note this on IRS Form 709. Any additional contributions from the account owner above this amount to the beneficiary during the five-year period would trigger gift taxes. Although such contributions are considered completed gifts, the account owner retains control of those contributions—and the account balance is not included as part of his or her estate.

Check out our webinar “A Definitive Guide for Education Planning” to learn about the best ways to save for college.

Announcing our Money Mastery webinar series

After great reviews from our Summer Webinar Series, we are pleased to announce a complimentary follow-up slated for the rest of September (kicking off next week, September 15th, at 3:30 PM PDT) – this time focusing on financial literacy, and meant for those in their teenage years through mid-career. While a great program to watch on your own, for those with children this entire series is geared to bring them in to watch with you, hopefully sparking conversations around money habits and education planning.

Each session will be approximately 30 minutes, with interactive polling for those logged in on the computer, followed by a live Q&A session.

Below are the dates and times for the webinar and click on the links to register:

September 15th at 3:30 PM PDT – Connecting the Dots to Your Financial Future (Part 1)

September 22nd at 3:30 PM PDT – Connecting the Dots to Your Financial Future (Part 2)

September 29th at 3:30 PM PDT – A Definitive Guide for Education Planning