Alternative Ways To Fund Your Studies
If you’re struggling for cash at university, here’s a quick list of other ways you can get more funding:
As a student, you might find that you come across adverts for private loan companies, but we recommend avoiding these and first considering your lower-risk options, like the ones above. You can find out more about this in our guide to Future Finance and the alternatives.
Don’t get caught out by any Student Finance myths…
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Develop A Plan With A Financial Adviser
Over half of parents with children in 10th grade or higher wish they had saved more per month the median saved is $200 each month. Notably, those with a financial adviser saved a total of roughly $14,000 more than parents without an adviser.
A financial adviser can be a great resource when starting your child’s college fund savings. They can help you navigate the multitude of options available, including how to maximize your investments and make withdrawals the most effective when the time comes. When you work with a financial adviser, they can paint a clear path to college for your child with manageable savings goals. If you plan to apply for grants, scholarships or financial aid, a financial adviser can also help you with that process, and factor that into your college fund savings.
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How Do You Open A 529 Plan
To open a 529 plan, you’ll need to decide whether you want to open a prepaid tuition plan or a college savings plan. Next, you’ll need to choose a provider and which plan you want to open. Consider plan fees when deciding on a plan. You’ll also need to choose a beneficiary and fund the account. Finally, if you’ve selected a savings plan, you’ll need to choose your investments.
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How Much Money Should Your Parents Give You For University
There’s a good chance you’re going to need some help from the Bank of Mum and Dad at university, but how much are they expected to contribute? We explain all here…
Credit: michaeljung, VikiVector Shutterstock
Since the current Maintenance Loan is often nowhere near enough to cover living costs in the UK, the government expects parents to pick up the shortfall. Basically, the more they earn, the more they’re expected to contribute.
Depending on where you live at uni and how much your parents earn, they could be expected to contribute over £5,000 a year. According to our 2021 survey, the average student receives £120.56 a month from parents.
Read on to find out exactly how much your parents should be contributing, and how you can go about asking them for it…
Bottom Line: Save As Much As You Can
When it comes down to it, you’ll need to reconcile your numbers with what you can afford. Saving for college is important, but it needs to work with your other priorities, like saving for retirement or building an emergency fund.
Be sure you’re doing all you can, though. Cutting expenses to save an additional $25 a week could have a considerable impact in the long runand make it less likely that you’ll struggle financially when it’s time for college.
Saving more can have a huge impact
This hypothetical illustration assumes an annual 6% return, as well as a weekly deposit for 18 years, for all examples. This illustration does not represent any particular investment nor does it account for inflation. There may be other material differences between investment products that must be considered prior to investing.
Saving more can have a huge impact
This chart shows what your final balance might be if you save different amounts each week. If you save $25 a week for 18 years, you could have a total balance of about $42,600. Increase your contribution to $50 a week over 18 years and your balance could go up to about $85,200. See an even more dramatic spike in your balance when you contribute $75 a week over 18 yearsand boost your savings to about $127,800.
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Consider Opening A 529 Plan
Most 529 college savings plans will let you set up an automatic investment or payroll deduction with as low as $25 per month.
529 plans have an added advantage over an everyday savings account. When you save in a 529 plan, your money grows on a tax-free tree, causing it to accumulate quicker. Your state may also offer an additional tax benefits such as tax credit or deduction for 529 plan contributions.
Withdrawals from a 529 savings plan are also typically tax free when used for qualifying college expenses, such as college tuition and other qualified education expenses.
Wondering how your 529 plan may impact financial aid? Use our Financial Aid Calculator to estimate the expected family contribution for FAFSA and your financial need.
Here’s How To Set A Savings Target Based On The True Costs Of College
Knowing how much to save for college is a big question for many families. After a home, a college education may be the most expensive most families ever buy. And unlike home prices, which rise and fall with the economy, the cost of a college degree seems to go in just one directionup.
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Follow The Order Of Operations For Saving For College
That single amount gives me sticker shock each month when I think about saving for my child’s college education. But it’s also an important reminder of why everyone should follow the Order of Operations For Saving For Your Kid’s College.
The key phrase is Y.E.S.:
YOU: You have to make sure your own financial house is in order before you try to save for your child’s college. If you can’t make rent, or buy groceries, there are bigger issues to fix first. However, the YOU bucket also includes saving for your own retirement and making sure you have an emergency fund. I’ve said this hundreds of times – you can’t get a loan for retirement. Make sure you save for yourself first.
Education Savings Accounts: If you’ve saved for yourself, next you can save for your child in Education Savings Accounts, like the 529 Plan.
Savings: After contributing some amount to the 529 plan or other education savings account, it’s smart to save in a traditional savings account as well, in case there are other expenses you want to help your child with that don’t qualify as education expenses.
College Costs How Much Gulp
To estimate the cost of college there is a great website that you can use to figure out how much you will need to save based off the type of University, as well as the years planning to attend. The website is apps.collegeboard.com/fincalc/college_cost.jsp. This website gives you the ability to pick the inflation rate of college costs, the years anticipated on attending, the percent of the total cost you would like to cover, as well as the years until your child has to enter the University.
For our example, I will be using four-year public tuition to figure out how much you need to be saving per month to pay for your childs complete college bill. These inputs are pictured below.
College is cheap..You wish!
According to the college cost calculator, the average cost of four-year tuition is $19,388 dollars per year.
With the five percent inflation figure, planned attendance of four years, and 18 years until college,the total cost of your childs complete education will be $201,108.
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How Much Should You Really Save For College
Jeff Rose, CFP® | September 07, 2021
A major goal for most parents is to see their children graduate from college and receive a good job so that they can live a long and fruitful life. The recent financial fiascos of the United States have put a strain on the ability of government to contribute to the ever increasing costs of college.
Historically college costs have inflated at around 5-8 percent annually, with some long periods of inflation over 8 percent. This could pose a major problem when your average investment return will be in the range of 7% annually based off the historical returns of the S& P 500. This sounds overwhelming at first, but starting to save early is crucial to your success. From the day your child is born you will have approximately 18 years to be ready for the day your son or daughter is ready for college, but the question is, how much should you save? This whole question become even more apparent in my life as we just welcome our third son into the world. Can you say, college tuition x 3 = Big Bucks?..Yikes! I know many other parents are in that same situation so I thought it would be best to help them figure out how much to really save for college.
There isnt a right answer. Youll have to figure that out on your own. What the numbers below will help you figure out is a ballpark figure on how much damage youll be looking at. If youre not sitting down yet, maybe you should..
It’s Used When Determining Aid Eligibility
When your child fills out their Free Application for Federal Student Aid , your family’s total financial situation is considered — including the 529 plan. Your child’s Expected Family Contribution — used to determine how much you can pay out-of-pocket for school — will increase with the 529 plan total. The higher your EFC, the fewer federal grants, subsidized loans, and work-study opportunities your child will likely receive.
Since a 529 plan is considered an asset, who owns the account is important. If the account is in a parent’s name, up to 5.64% of the amount saved is counted toward your child’s EFC. However, if the account is in the child’s name, up to 20% is counted.
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You Wont Lose Your Money If You Child Doesnt Use It
If your child ends up not pursing college there are other ways to take advantage of a 529 Plan. The account can be used for other types of education besides college, including trade and vocational schools and more. The beneficiary can be changed to another member of the immediate or extended family: parents, siblings, nieces, nephews, or first cousins are eligible recipients.
If you decide to use the money for something other than qualified education expenses, you will have to pay income taxes plus a 10% penalty on the earnings.
Keep in mind that every path to college is different. For some kids, college is a 4-year rite of passage that takes place immediately after high school graduation. For others, they might not be fully college-ready until theyre in their late 20s or older. Not every path is straightforward and traditional. Whether your child is 19 or 39, they can use funds in their 529 plan for college or other post-high school learning when theyre ready.
Next Steps To Consider
Trends in College Pricing and Student Aid 2020Trends in College Pricing and Student Aid 2020Trends in College Pricing and Student Aid 2020Note on Methodology
Investing involves risk, including risk of loss.
Please carefully consider the plan’s investment objectives, risks, charges, and expenses before investing. For this and other information on any 529 college savings plan managed by Fidelity, contact Fidelity for a free Fact Kit, or view one online. Read it carefully before you invest or send money.
Fidelity Brokerage Services LLC, Member NYSE, SIPC, 900 Salem Street, Smithfield, RI 02917
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Start Saving When Your Child Is 5 Years Old
Keeping all the same variables in place except for changing the time to college to 13 years , how much would you need per month? Due to the shortened time frame until college, the estimated total cost of college is now $157,574. This is a counterintuitive figure because it is less than the numbers above this is not actually the case. It is just the case because the total cost had less time to inflate, but you also have less time to save! Earning a 8% return on your investment for the next 13 years would leave you to save $577.36/ month. If you were only able to earn 6% on your investment, you would need to save $669.25/ month. For those of us working on a tight budget as it is, the extra hundred dollars a month more of savings by waiting the extra five years may not be attainable.
Why You Can Trust Bankrate
Founded in 1976, Bankrate has a long track record of helping people make smart financial choices. Weve maintained this reputation for over four decades by demystifying the financial decision-making process and giving people confidence in which actions to take next.
Bankrate follows a strict editorial policy, so you can trust that were putting your interests first. All of our content is authored by highly qualified professionals and edited by subject matter experts, who ensure everything we publish is objective, accurate and trustworthy.
Our banking reporters and editors focus on the points consumers care about most the best banks, latest rates, different types of accounts, money-saving tips and more so you can feel confident as youre managing your money.
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How To Set Your College Savings Goal
Since 3 x 1/3 = 1, that suggests that the college savings goal should be equal to the complete cost of a college education the year the baby was born. Saving this amount will yield enough money to cover about a third of the future college costs.
You might not be able to predict the specific college in which your child will enroll 17 years from now, but you might be able to predict the type of college, such as an in-state public four-year college or a private four-year college.
The College Boards annual Trends in College Pricing publication reports an average cost of attendance in 2017-2018 as follows:
- Public four-year college : $20,770
- Public four-year college : $36,420
- Private Non-Profit four-year college: $46,950
Assuming that the current inflation rates of 3.1%, 3.2% and 3.5% continue, the complete cost of a college education for this years college freshmen will be about $87,000, $153,000 and $198,000.
FREE TOOL: Calculate the cost of sending your child to college with our College Savings Calculator
What If You Havent Saved Enough
No matter how early you start saving for college or how much you put in, theres always the possibility that it wont be enough when it comes time to send your child off to school. Even if you havent saved enough money, there are still ways to help your child pay for college:
- Parent PLUS Loans: Parent PLUS Loans are federal student loans will go under your name as a parent, unlike many student loans which go directly to the student. However, keep in mind that this means that you are responsible for paying back the loan. Paying back student loans can be done at a lower interest rate with student loan refinancing.
- Private Student Loans: You can help your child to take out a private student loan, funded by a private lender, such as a bank or a credit union, to pay for college. If your child is interested in taking on the debt by him or herself, you may be able to help out by cosigning their student loans.
- Grants and Scholarships: No matter how much you are able to contribute, you should always apply for grants and help your child find scholarships. These are sources of college funding that you dont have to pay back later, if you can get them.
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Average Amount Parents Pay For College
According to Sallie Maes study, How America Pays for College, in the 2017-2018 academic years, parents paid for 34% of college costs from income and savings. On top of that, 53% of families needed to borrow money to help. And at the end of 2018, parents held $89.8 billion in Federal Parent PLUS loan debt according the U.S. Department of Educations office of Federal Student Aid.
Set The Right Monthly Goal
Is it a little too difficult to imagine the end goal, years from now? Consider walking it back to a monthly contribution amount. Just remember that how you save will make a big impact on how much you save by the time your child starts college.
Many experts recommend using a 529 college savings plan, a tax-advantaged investment account. A 529 plan offers tax-free growth and withdrawals for qualified higher education expenses, which include tuition and fees, room and board, books, computers, and special education expenses.
What does this mean for you? Choosing a 529 plan could mean a much lower monthly contribution since the money grows over time. With a 529 plan, a solid monthly contribution amount for a child born in 2017 would be about $165 for a public in-state school, $260 for public out-of-state, or $325 for a private university.
If you intend to save using a traditional savings account or a taxed investment account, youll want to adjust your monthly contribution accordingly. For example, the average interest rate on savings accounts as of October 2021 was just 0.06% APY . At that rate, in a savings account, youd need to contribute about $300 per month for 18 years to pay for a third of the projected cost of a public, in-state college around $500 for out-of-state and around $600 per month for a private university. Nearly double the required savings compared to a 529.
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