By Mary Anne Busse
Managing Director, Great Disclosure LLC
December 28, 2015
As I say goodbye to 2015, I can’t help but focus on the great achievement in college savings this year. As of June this year, total investment by American families in 529 plans reached a record level of $258.2 billion. In addition, total numbers of accounts continue to increase and average account size reached an all-time high of $20,934. These numbers would be enough to make anyone have a Happy New Year but I’m still hoping for more! I want every child to have the chance to go to college. Some might say that’s a lot to ask, but I think that thinking underestimates the principles upon which our country was founded.
At this time of year, we hear from so many organizations looking for help distributing food and presents to those in need. It often reminds me that not everyone is able to save for college and encourages me to find creative ways to deliver the message of the importance of college savings to those that are working hard to just pay the bills.
The sad fact is that most who think they’ll receive free money for college in the form of grants and scholarships receive a financial aid package that looks like a “full ride” but actually contains more loans than free money. But when your child is five years old, how do you know how much financial aid you will qualify for – or not qualify for?
Should you study the Free Application for Student Aid (FAFSA) now? What if your financial circumstances change or the federal requirements change significantly by the time your child is ready for college? How do you know what kind of aid you’ll receive? How do you know how much to save? Those questions are even more difficult to answer than “how does Santa get from house to house so fast in one night?”! Since I have no concrete answer to those questions, my approach is to assume that my daughter will receive no aid and that I must save as much as I can. In hoping for the best and planning for the worst, if my daughter receives a scholarship for her amazing soccer skills (she’s a pretty good player, but you know I’m biased!), I’ve got funds for anything not covered by the scholarship or graduate school or I’ll have a legacy to leave for my grandchildren. If she doesn’t receive scholarships or grants, I’ve got funds to pay for her education and can avoid being saddled with a lot of debt.
To take some of the guess work out of the equation, I use this College Cost Calculator to assess my savings goals and adjust them each year at this time to make sure I’m on track to save as much as I can for my daughter’s future. Using this College Cost Calculator, you can enter your child’s age, type of school she’ll attend, college cost inflation, number of years attending and type of expenses you’re saving for. Enter information for a private college and the number can be scary but enter information for an in-state community college and the numbers are much more manageable I also live in a state with a tax deduction for contributions to my state’s 529 plan so I make sure I’ve contributed as much as possible before December 31st to take full advantage of those great tax benefits. It takes a little extra work while I’m wrapping presents and planning parties, but my daughter’s future is more than worth it! Doing a little planning now can truly make 2016 a happy and prosperous year!
About the Author
Mary Anne Busse is the Managing Director of Great Disclosure LLC, a full service consulting firm dedicated to the 529 Plan marketplace. Great Disclosure represents 529 Plan administrators on all aspects of 529 Plan administration, marketing, and operations.