With college just around the corner, it’s time for your child to finalize the college application and admissions process. Staying organized and on top of deadlines will help you and your child feel less stressed and be more confident about their final college decision.
Now is also the time to start considering 529 plan withdrawal strategies. Before you take a 529 plan distribution, calculate your child’s qualified expenses and be sure to time your withdrawals appropriately to avoid paying income tax and a 10% penalty on the earnings portion of the distribution.
Here are the final steps to focus on during your child’s junior and senior year of high school as they prepare for college.
Junior Year
Start taking AP and IB classes
Students may take Advanced Placement (AP) and International Baccalaureate (IB) classes during their junior and senior years of high school for an opportunity to earn college credit.
Apply for scholarships
Your child can find scholarship opportunities through a free online scholarship matching service, their (or a parent’s) employer, local businesses, community foundations, religious organizations, fraternal organizations, civic groups and national professional membership organizations. There are many scholarships worth $100,000 or more.
However, be careful of scholarship scams. Requests for unusual personal information, such as a Social Security Number or bank account number, or any type of fee should be a red flag.
Protect your college savings
At this stage, time is no longer on your side. If there is a substantial drop in your 529 plan portfolio, you may not have enough time to recover.
Parents of high school juniors should consider lowering their 529 plan equity exposure to around 10% to 20% and increasing their allocation to bonds, money market funds and other fixed income investments to 80% to 90%.
Take the PSAT
Students who take the Preliminary SAT (PSAT) in October during their junior year may participate in the National Merit Scholarship Program. Each year around 7,500 finalists receive a Merit Scholarship Award, which may be a $2,500 scholarship, a corporate-sponsored scholarship or a college-sponsored scholarship.
Craft a college list
Talk to your child about what type of college they want to apply to. Make a list of potential colleges based on the type of school, academic programs offered, location, size and cost.
When comparing college costs, use a net price calculator to evaluate affordability. The net price is the college’s cost of attendance minus any grant aid your child might receive. You can find a net price calculator for each college on its website.
Attend financial aid events
Attend financial aid nights at your child’s high school. Your child can speak with school counselors and other financial aid experts about the Free Application for Federal Student Aid (FAFSA) process, specialty grants, scholarships and private student loan options.
Take the ACT and/or the SAT
Many students take the ACT and/or the SAT during the spring of their junior year of high school. This gives the student a head start on planning for college and enough time to retake the test if they want to try and improve their score.
Senior Year
Manage deadlines
Create a calendar with your child to outline deadlines for admissions, financial aid and scholarship applications for each college.
File the FAFSA
Your child can file the FAFSA and the CSS Profile as early as October 1 of their senior year of high school. Students who apply for aid earlier tend to get more grants than students who apply later, since many types of aid are awarded on a first-come, first-served basis until the money is depleted.
Over 6,400 colleges and universities require students to complete the FAFSA to apply for financial aid, and about 200 mostly private colleges require students to complete the CSS Profile in addition to the FAFSA.
Evaluate your financial aid award letter
Colleges typically send out financial aid award letters in March or early April. Financial aid award letters can be confusing and difficult to decipher. Make sure you and your child understand the key elements of a financial aid award letter, including the differences between free and borrowed money and the cost of attendance versus net price.
Appeal for more financial aid if needed
If circumstances outside of your control affect your family’s ability to pay for college, you can ask for more financial aid. Common examples of special circumstances include job loss, death of a student’s parent, damage from a natural disaster and end of child support. You must provide documentation of the event when you appeal for more financial aid.
Accept an offer of admission
May 1 is National Candidates Reply Date, also known as Decision Day. Your child will have to decide which college’s offer to accept, mail a tuition deposit (maybe also a housing deposit) and any other required paperwork by this date.
Continue contributing to a 529 plan
You don’t have to stop contributing to a 529 plan once your child begins college. There is still time to take advantage of federal tax-deferred growth, and you may collect an annual state income tax break if your state offers one.
In most states, you are not required to hold funds in a 529 plan for a specific period of time before claiming a state income tax deduction. Some families funnel college tuition payments through a 529 plan, effectively getting a discount on college tuition at their marginal state income tax rate.
