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COLLEGE SAVINGS 101

College Savings Timeline: The home stretch

Posted: 2014-05-23

by Kathryn Flynn

College Savings Timeline: The home stretch

Youíre the parent of a high school junior, which means in just two years your child will be on his or her way to college. Although somewhere between getting a drivers license and going on a first date planning for college may have fallen to the wayside. Time is running short and if you havenít been preparing you have quite a bit of work to do. In this weekís College Savings Timeline, we discuss the five most important college planning steps for the final years of high school.

1. Evaluate your child's college fund (or lack thereof!).

If youíve been saving with a 529 college savings plan, now is the time to compare the balance with the expected costs of the first few years of college. Our simple college calculator can help estimate what your total costs will be and if you will be able to save enough in time. Be sure to double check that your investment allocations are now weighted toward conservative options like bonds. (If you have an age-based 529 plans this is done automatically).

If you realize you have saved too much, lucky you! It may still be smart to continue making contributions since your child may end up transferring to another school or continuing on to graduate school. If you havenít started saving yet, youíll need to first figure out a way to come up with the required down payment for the first tuition bill. Once you have that covered, youíll need to start a savings plan to prepare for the remaining semesters. 529 accounts are still a good option, even this late in the game. You will still get the benefit of a professionally managed portfolio and be able to take advantage of federal (and sometimes state) tax benefits. Every little bit you save will shrink your childís future student loan balance.

Calculate the true cost of loans.

2. Narrow down school choices.

In order to plan for the upcoming expenses, you need to have an idea of what they will be. At this point, you should have already been researching colleges and touring campuses. While you may have had your heart set on your son attending your alma mater, its important to look out for his best interest first. If you havenít been able to put away enough money for the school of his dreams youíll need to explore other options. If you live in a major metropolitan area there may be a number of colleges or universities he could commute to. With average room and board costs around $10,000 itís almost a no-brainer for cost conscious families. An even less expensive option is to suggest a community college for the first two years. This also gives your child a chance to get their general courses out of the way while they focus on choosing an area of study and the appropriate university to complete their degree.

How much does college really cost?

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