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College Funding Worksheet

When it comes down to it, we are asking 17-year-olds who have hardly held a job, never paid taxes, or had any exposure to personal finance to make one of the biggest financial decisions of their lives.

Today we want to share a framework your family can use to make reasonable and equitable decisions around your son or daughter’s higher education.

Step One: BUYING POWER

Before targeting specific schools, it may be helpful to get a handle on how much money we can bring to the table. Savings can come from 529 College Savings Plans, grandparents, and personal savings. But remember, goals often compete for the same dollar. Retirement and other goals should be considered.

Next, look at cash flow. Are there any monthly savings or surplus to redirect? With one less person in the house, could monthly spending reduce a few hundred dollars? If $400 per month could free up, that’s $19,200 over four years, that’s real money, write that down.

Finally, review the American Opportunity Tax Credit. If a married family earns under $180,000 per year they are eligible for up to a $2,500 per year credit. Over four years, that’s $10,000 in credit, write that down too.

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Step Two: LOANS

Part two of the exercise looks at loans. Just like a mortgage, it is helpful to find out how much we can afford, or, how much we can qualify for. The US Department of Education does not really have a qualification process like mortgage bankers, it is on ourselves to exercise self-care and prudence.

In some cases, parents are willing to come to the table and take out a loan. The loan can be private, federal, home equity, you name it. Question to ask is, how much can I bend on other goals to assist my son or daughter as they become independent?

One idea for the prospective student is to select a field of study and understand what that major typically pays after graduation. Next is to evaluate what the payment will be on a standard ten-year repayment schedule. Having a monthly student loan payment after graduation of about 10% of gross income is manageable, 30% is often unbearable and warrants costly repayment programs.

Step Three: SHOP IT OUT

Remember, college is a business, in fact, they are kind of like car dealerships. The sticker price could be $50,000, but the price is laden with grants, needs-based scholarships, etc. It is okay to look at the Aston Martin if it is 50% off, but it might not be okay if the discount is 10%.

To learn more, create a profile on collegeboard.org. They have a “Net Price Calculator” where you can learn more about each school’s approach to financial aid. Many schools that have the fancy sticker price here in New England have some pretty good deals depending on the parent’s current financial situation.

BOTTOM LINE

Higher education does not have to be ivory columns, lush quads, and football. Traditional institutions are being challenged by smaller, job focused options. Trade schools, coding schools, and the like are becoming viable options where students can learn, work, and receive respectable jobs after completion.

Like our own goals, our children need to start building a life they can love. They will not get it right at first but walking some degree of north is important. Where they go to school is a major life decision and they should be able to articulate why that school is important to them.

Regardless of direction, the above framework will help contextualize this major decision by considering a variety of variables. Acorn is in the business of helping people live lives they can truly love. Sending our children to school to then see them be independently successful is massive.

I am interested in the strategy and want to meet with Acorn Financial


Acorn Financial is in Nashua, NH. We are a fee-only financial planning and investment management firm. We work with successful families and businesses in the region who are committed to financial independence. Our first meeting is always free and we welcome your interest.

Here is our contact information:

Acorn Financial
Drew Hefflefinger, CFP®
400 Amherst Street, Suite 303
Nashua, NH 03063
(603) 816-3404
drew@acornnh.com
www.acornnh.com


Advisory services offered through Commonwealth Financial Network, a Registered Investment Adviser.


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