Paying for College: 5 Steps to Take Control

At The Core is excited to bring you this paying for college guest blog from Joe Messinger, CFP®, co-founder of Capstone Wealth Partners. Joe is a leading authority on late-stage college funding. He frequently speaks to organizations and parent groups. He is also a highly regarded thought leader in the financial planning community, frequently speaking at industry conferences. We are thankful for his Smart Money Moves for the College-Bound™ webinars!

In Ohio alone, there are 1,807,500 student loan borrowers owing approximately $61.5 billion in debt. The average borrower owes $34,025. These numbers don’t lie – it’s clear that paying for college is at a real crisis point, but hardly anyone seems to have a solution. Researchers, professionals, and reporters only ever discuss the problem of student debt with hardly any real fixes for families.

We’re here to help you create an actionable strategy to tackle paying for college that addresses your unique financial needs. Ready? Let’s dive in.

Leveraging Tax Deductions and 529 Plans

Did you know that you can leverage contributions to the Ohio 529 Plan as a tax deduction?

It’s true.

Ohio residents can deduct up to $4,000 per beneficiary, per year, for contributions made to a 529 Plan.

“For tax years 2022 and prior, this deduction was limited to contributions made to an Ohio 529 plan account. Beginning with tax year 2023, contributions to any state’s 529 plan are eligible for this deduction.”

This deduction can help encourage families who can afford it to save more toward education costs, all while lowering their tax bill.

As a reminder, your 529 contributions are not capped at $4,000. This amount is the maximum you can deduct on your state taxes. If you contributed more than $4,000 in one year to a 529, you can carry over that surplus amount to subsequent tax years (subject to the $4,000 per year max.)

Save What You Can

While tax deductions and other fringe benefits are nice to have, it’s important to look beyond them to determine what, exactly, your family can save toward college costs. The earlier you start and the more frequently you contribute to your 529 plan or other college saving fund, the more likely you are to successfully offset the cost of higher education.

Most families will not be able to save enough to pay the entire bill. We understand. But every bit will help.

Take advantage of the tax-deferred benefit of 529 plans. Understand how they work and how you can use them. (Check out a previous blog for 11 secrets you might not know.)

Learn What You Can

Learn all you can about the funding process. Research online (starting with our blogs!) Take a workshop (maybe a Smart Money Moves webinar?) Fight debt with knowledge.

Create a Strategy for the Whole Family

Pull all the pieces together into an all-encompassing plan that accounts for each of your kids and your other long-term financial goals. This includes:

• Ways to earn college credit before college starts: Advanced Placement (AP), International Baccalaureate (IB) courses, and College Credit Plus or Dual Enrollment coursework
• Assets: How much can you save? Do grandparents want to gift money?
• Scholarships: Students need to understand the impact of their grades and test scores on financial aid offers.
• Grants: Will your family be eligible for need-based aid?
• Cash flow: How much do you spend on your child each month now? Can that monthly amount be used for college?
• Tax credits: Use those that apply to your personal situation.
• Student loans: Prioritize federal loans over less flexible and frequently more costly private loans. Use loans only to cover any gap. Remain cognizant of the total 4-year loan amount you are going to incur. We always recommend a debt amount not exceeding the expected first year’s salary after graduation.

Think About Affordability

The best college fit for your student has to include a price you can afford with a student loan debt amount after graduation that your student can manage. The results of too much student loan debt include not being able to save for retirement, a home, or their own children’s education. And the dreaded “boomerang” back home to your basement.

If you want to know more about the actual “sticker price” of colleges and compare costs of your top schools, we recommend leveraging our College Money Report™. This report will help you determine the costs of your top schools, what your expected family contribution will be, and whether you qualify for scholarships, grants, or other types of financial aid.

Get Help

If you are having trouble, consider working with an expert. Sometimes you just need help from a trusted advisor. With a strong plan in place, paying for college will not get you in over your head with debt. Take control and have a plan by contacting us today.

Your Top 3 College Questions: Answered

Need help organizing your college funding plan? Our free College Money Report™ can help. This report takes less than five minutes to complete, and answers three critical questions for your family:

1. How much do colleges think you can afford?
2. Will you qualify for grants and/or scholarships?
3. How much you will be expected to pay out of pocket?

Ready to dig in? You can sign up for your free report by clicking here.

 

Updated 8/2024

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