EagleTribune.com, North Andover, MA

August 18, 2013

Do you have a college savings plan in mind?

Financially Speaking
John Spoto

---- — Helping our children pay for college is one of the biggest and most important financial challenges that many families will face.

Currently, a four-year education (tuition, fees, room and board, supplies and personal expenses) can range from $100,000 at a public university to over $240,000 at a private institution like Boston University.

With expenses expected to continue to rise at the current rate of 5 percent per year, the costs could skyrocket to $150,000 for a public school and over $360,000 for a private institution for a student matriculating in 2020.

Making matters worse, planning for college gets more complicated each year because of the ever-changing rules, regulations and tax laws. Feeling overwhelmed and confused, many parents fail to develop an effective plan, leading to burdensome debt affecting both parents and students for years to come.

Numerous studies have shown that while most parents feel helping their children pay for college is one of their most important financial objectives, few are financially prepared to do so. Some reasons include underestimating costs and failing to reduce discretionary spending in order to reach their college-funding goal.

Some parents also have unrealistic expectations and make false assumptions regarding the availability of financial aid. Though in many cases parents and students will not be forced to bear the entire cost of the education, most college financial aid administrators agree that parents overestimate the amount of scholarship, grant and other financial aid their children will receive and have a false sense of security that the schools will help them cover most expenses.

Therefore, you should not base your college savings plan on the hope of a generous financial aid or scholarship package that may not come to fruition. The fact is about half of all college students get no such money at all, and instead have to pay the full cost of attendance by borrowing, working or withdrawing from their savings.

That, in essence, is the bad news. Now, here is the good news.

First, developing an effective college savings plan is achievable if you keep it simple and are willing to invest the time and effort to keep abreast of the changes in regulations and learn how to use the tax and investment options available to you. Tax-advantaged savings vehicles as well as tax credits and deductions are available to help take the sting out of college costs.

Second, for those of you who start early, you have time and the power of compounding on your side. Even small, regular contributions to a college savings plan can go a long way to defraying the costs for the time when your child actually starts school. Saving early and regularly is the surest way to build an education fund.

Helping educate your children is one of the most important things you can do as a parent. Planning ahead, saving diligently, doing your research and applying some good old-fashioned common-sense will allow you to help your children pay for college when the time comes.

John Spoto is the founder of Sentry Financial Planning in Andover and Danvers. For more information, call 978-475-2533 or visit www.sentryfinancialplanning.com

This article is for general information purposes only and is not intended to provide specific advice on individual financial, tax, or legal matters. Please consult the appropriate professional concerning your specific situation before making any decisions.