By Susan Le, Marketing Manager, Peachjar
February 21, 2017
Obtaining financial assistance is arguably the most critical component of college planning, among the many other pertinent items on the preparation checklist. The experience of attending college can be overwhelming enough as is, let alone the added stress of paying for college expenses- which can be a major distraction for a new college student.
According to the National Student Financial Wellness Study, a national survey conducted by Ohio State’s Office of Student Life and College of Education and Human Ecology, 60% of college students said they were stressed about not having enough money to pay for college and 32% of students neglected their studies because of their debt.
Additionally, the study reported that 64% of college students paid their college fees by borrowing money from a loan and of that total, 24% said they expected the loan debt to be between $30,000 and $50,000 by the time they graduate. These financial concerns led approximately three of 10 students to reduce their number of classes, while 16% of those surveyed took a break from their studies, and 13% transferred to another institution.
So how can families in the college planning process avoid these undesirable outcomes? With financial assistance through 529 plans and scholarships, parents can rid their students of financial worry and minimize the amount of debt in their name after graduation.
So, what exactly is a 529 plan, you ask? Much like a 401(k) or IRA, it allows you to keep funds in an investment account for an allotted period, and then withdraw it tax-free. Of course, this all depends on the type of 529 plan you invest in, which could be a prepaid plan that allows you to lock in lower rates and generally covers tuition and fees, or a savings plan that can be used to pay for tuition and fees along with other qualified higher education expenses, but the financial return depends on the money you invest and the terms of the account. Learn more about the advantages and benefits of 529 plans.
As for scholarship opportunities, they can be found a multitude of ways, including contacting your student’s high school counselor, a college financial aid office, or career center, or by using an online search tool such as www.careeronestop.org.
Now what happens to your 529 plan if your student earns a scholarship? Another great advantage of having a 529 plan is the ability to make penalty-free withdrawals, up to the full amount of any scholarships your student receives. The earnings will be subject to income tax so if you wish to avoid the tax associated with the withdrawal, you can use the remaining balance to pay for other college expenses that aren’t covered by scholarships, such as certain room and board expenses.
A little bit of early preparation can go a long way in your student’s educational success. Getting ahead of the financial planning process through resources like 529 plans and scholarships ensures that your child is set up for optimal college success and can be the difference between a student struggling through college and one that achieves academic success. So why wait to set your student up for college success? The resources are right at your fingertips.
About the author:
Susan Le is a Marketing Manager at Peachjar, the leading digital flyer distribution platform that U.S. and Canada school districts use to send home pertinent information to parents. Since 2011, Peachjar has served over 5 million parents and worked with thousands of program providers nationwide to deliver opportunities and resources to students that help them succeed.