How Will Your Children Pay for College?

As high school seniors prepare to celebrate graduation, many of their parents are already thinking about the large bills that will accompany the start of college in the fall. Meanwhile, the price of higher education continues to rise at a time when most household incomes are not. Baird’s Wealth Management Insights brief for May offers ideas to help you and your child make this important investment wisely.

What you should know:

1. College is one of the largest investments most individuals make. However it is funded, higher education is a substantial expense for any family. For the 2011–2012 academic year, published averages for tuition, fees, room and board combined were:

• $17,131 for in-state public four-year institutions(up 6.0% from 2010–11).*

• $29,657 for out-of-state public four-year institutions (up 5.2%).*

• With a total price tag that could range from $70,000 –$155,000, a four-year college education isn’t something most American families are in a position to pay for with cash on hand. And that range does not account for the possible impact of increasing inflation on living expenses or increases in tuition and fees.

2. Future tuition increases are extremely likely.

• While recent double-digit tuition hikes at public colleges in California, Arizona and Nevada weren’t normal, the cost of college tuition alone has increased annually by an average of 5.6%1 beyond the rate of inflation at four-year public institutions over the past decade.

3. Student loans

consider where loans are concerned:

• Income restrictions may disqualify the children of some families from eligibility for subsidized loans; however, regardless of your circumstances, it is recommended that you or your child fill out the Free Applications for Federal Student Aid (FAFSA). Forms are available at fafsa.ed.gov.

• The deadline to submit the FAFSA is the end of June for the current school year. If your child is already in college, you can still fill out a form and submit it by midnight on June 30.

• States and individual schools usually offer additional financial aid opportunities, and their individual deadlines can vary. Be be sure to contact your school of choice early when exploring your options.

• Be aware of the risks. It’s highly advisable to set aside money each month for the unexpected – car repairs, medical costs or other emergencies – and to maintain an emergency savings that would cover expenses for at least three months in case you can’t work and experience a disruption in income.

4. May is “529 Month.”

State-sponsored 529 plans provide a tax- advantaged way to set aside money for the cost of a child’s education while taking full advantage of compounding over time.

∙ Accelerated gifting techniques for 529 plans offer the option for donors to maximize their contributions in a single year.

∙ Earnings grow tax-deferred and are not subject to federal tax on withdrawals used for qualified higher education expenses.

* Trends in College Pricing 2011 (The College Board)

What You Should Do Now:

An education is an important investment in your child’s future – and a subject worth doing your homework on. Investigate your financial aid options carefully and talk to your financial advisor annually about your investments and savings plans for the future college graduate in your life.

Article provided by Robert W. Baird & Co. with the authorization of its author for Evan Guido, Vice President, Financial Advisor at the Sarasota office of Robert W. Baird & Co., member SIPC. The opinions expressed are subject to change, are not a complete analysis of every material fact and the information is not guaranteed to be accurate.

Evan R. Guido
Vice President of
Private Wealth Management
One Sarasota Tower, Suite 806
Two North Tamiami Trail
Sarasota, FL  34236-4702
941-906-2829 Direct Line
888 366-6603 Toll Free
941 366-6193 Fax

www.EVANGUIDO.com

Got a question? Ask Guido!