Melissa Sotudeh, CFP®, recently shared her top 3 tips for saving for college with GoodCall.
Hi, I'm Melissa Sotudeh with Halpern Financial, and I'm here to talk about three tips for preparing to pay for college.
Tip number one. Do due diligence on the cost. Know how much it's going to cost and how much you can pay for. You can go on each university's website. They have a net price calculator to determine what your expected family contribution is going to be. Then you can look at what you have set aside in 529 savings, other savings and cash flow. Once you determine what you can actually cover, then it's important to look for a financial safety school.
You can go onto various websites to see what schools will meet 100% of need, and what schools are generous with merit-based aid. Merit based aid is generally considered a discount. Many families assume that they'll qualify for need-based aid when in actuality they don't, but they can qualify for merit-based aid, so understand these numbers.
The second thing is, please remember, do not sacrifice your retirement to pay for college. You can borrow for college but you can't borrow to retire. So it's very important to continue to maximize your savings towards your retirement plans. These plans are not included in the estimated price calculators and if you do salary defer, sometimes it can bring your tax base below the amount that qualifies you for a education tax credit.
The third thing is, involve your child. Make sure your child understands the financial obligations that they're going to be facing. If they are expected to contribute a portion, maybe to books, or spending money, make sure you involve them. Also, encourage them to graduate in four years. If they go an extra year, it's an extra 20%.
So please remember, do your due diligence on cost, do not mortgage your retirement, and make sure you involve your child.
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