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Tutorial - Your goal: affording the college of choice

[Excerpted from's Family Guide to College Savings]

Most people look at the price of a college degree as an expense, like the electric or cable bill. But what if you looked at it as an investment? According to the U.S. Census Bureau, in the year 2009, the average male college graduate, aged 25-34, earned 85% more than the average male who completed only high school or had a General Education Development (GED) certificate. Among women the same age, college graduates earned 111% more than non-graduates.

Over a lifetime, the additional earnings resulting from this “investment” in education could easily exceed $1 million.

Still, the question remains: How will you finance that investment?

Pay as You Go
Your child could help pay for college by getting a job, but students must already juggle studies and other college activities. Even a part-time job might detract from their primary focus – getting an education.

You can also plan to pay college expenses out of your future income as long as you realize that doing so might require substantial cutbacks in other areas of your family budget.

Pay Later
Some might suggest that you approach college tuition as you would buying a home – borrow the money to pay for college and simply repay the debt with higher earnings after graduation. Though many parents see advantages in having children contribute to their education expenses, a college education can be as costly as buying a home. How many parents want their children to start out with such substantial debt?

Find Someone to Help Pay
Scholarships and grants are the ideal financial aid. They don’t have to be paid back. But according to the College Board, less then $50 billion of the $165 billion in federal financial aid for the 2013-14 school year came in the form of grants, while over $95 billion was loans. (The rest was federal work-study and the value of education tax benefits.)* The states, employers, private organizations, and colleges themselves provided an additional $74 billion in scholarships and grants in 2013-14.

Save Now for More Freedom and More Choice Later
Saving now is the best way to ensure that you have options later. After all, you would like your child to select a college that offers the best education and not necessarily the best financial aid.

You probably also want the comfort of knowing that you won’t be dependent on outside sources like loans or scholarships to meet college expenses.

Many strategies and investment vehicles are available to help you maximize your college savings. Selecting a suitable strategy and the best combination of investment vehicles is critical. For each option, you face the task of evaluating key characteristics including:

  • The potential for growth
  • Risk of loss
  • Tax implications
  • Ownership and control
  • Ease of management
  • Fees and expenses

The decisions you make now can have a significant impact on how much money is available for tuition payments in the future. In this tutorial, we focus on the most common components of a sound college savings plan – a plan that can give you and your future college student a high degree of financial security and the confidence that you can afford the college of choice.

*The College Board, Trends in Student Aid 2014.
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