Financing Higher Ed, Part 1

The first time anybody brings up college, university, or getting degree there is one lingering question that a lot of folks have… how do I pay for all this? In today’s episode, we get into the many ways of financing your post-secondary education,  whether it's college, university, or vocational school. 

#PayingForCollege #FinancingHigherEducation 

Links/Sources:

https://www.usnews.com/education/best-colleges/paying-for-college/slideshows/tuition-free-colleges

https://www.usnews.com/education/articles/completing-the-css-profile-everything-you-need-to-know

https://www.irs.gov/pub/irs-pdf/p970.pdf

Live Better U: Walmart’s Education & Career Benefits

https://www.myfloridaprepaid.com/

Transcript

SPEAKER_00: 0:19

Hello, and welcome to the Thinking a Head podcast. My name is Ronaldo Stevens, and I'm your host on this journey to find out more and discover the truth about careers, college, and finance. When I was getting ready for college, I heard the advice that most of you have probably heard or hearing about how to pay for school. Get good grades, volunteer, do extracurriculars, and search for scholarships. Then get loans to cover whatever you don't get in scholarships. While the first half of that advice is not wrong, it is far from complete. I went into school thinking that scholarships were and loans were the only way to pay for school. It's like being told that a lemonade stand is the only way to earn money as a kid. The idea works, but maybe it's not the best way for you. Not to mention, if everybody starts selling lemonade, or in this case, applying for the same scholarships, it does make for a lot of competition. Paying for college is intimidating, as is any big purchase. Most times when people see a purchase that big, they look for the simplest way to get the money, which most times is a loan. So we start thinking to ourselves, oh I need to get the loan, or I need to get the scholarship. But the truth is you shouldn't be using just one method or just one way to pay for your college. Just like if you purchase a car, you should not just use out-of-pocket money. Of course, if you're lucky enough to do that, please do. But uh you shouldn't also be getting just a loan. You should think about combining several methods to make the payments, and then combine these into a seamless and debt-free way to pay for your item. Or in this case, college. I like to compare it to building a house. Sure, you could make your house only out of wood, but that wouldn't be the strongest or most comfortable for all parts of the structure. You would want glass for windows, uh, ceramic or maybe shingles for the roof, and probably a concrete base to protect from the wind and burringo insect burring burrowing b insects. Before I get too lost in all these analogies that I'm throwing at you, my point is this your college payment plan can be less intimidating and even stronger by thinking of more than one method. So today I want to talk about the many different ways to try and fund your higher education outside of and including scholarships. Truthfully, there is a lot to cover in this episode, and each of these methods I'm describing could technically have their own episode. But timely information that notifies is better than doing deep dives from the start. So I'm actually going to split this up into two episodes. I promise that in future episodes we will do even more research and give more information, and hopefully some interviews also that tie into each of these methods. These episodes will have advice and methods for parents and students alike. So please, grab your family, a notepad and pin, and maybe some hot cocoa, and listen to and discover more about the plethora of ways to pay for higher education. Disclaimer. This podcast is designed to provide accurate and authoritative information in regard to the subject matter covered. It is provided with the understanding that neither the author nor the publisher is engaged in rendering legal, financial, medical, or other professional services. While the creator has used their best efforts in preparing this information, that's me, they make no representations or warranties with respect to the accuracy or completeness of the contents. The advice and strategies contained herein may not be suitable for your specific situation. You should consult a qualified professional where appropriate. Nobody in connection with this podcast shall be liable for any losses or damages resulting from the use of this information. Or as my old coach would say, don't be stupid. Now, on to our funding options. I had to include that because of the 529 market plan. First up, one of my personal favorites that is becoming popular recently is the 529 savings plan. Why is it my favorite? It's the best way for parents to invest in their children's future and save money for college. And I do mean invest, as it is an investment account. According to the IRS's website, the 529 is a plan operated by a state or educational institution with tax advantages and potentially other incentives to make it easier to save for college and other post-secondary training, or for tuition in connection with enrollment or attendance at an elementary or secondary public, private, or religious school for a designated beneficiary such as a child or a grandchild. This means that even grandparents can start saving for their grandchildren. Not only that, the IRS says you can name anyone a beneficiary, family, friends, even yourself. The real power of the plan though is that the earnings and withdrawal are tax-free as long as they are used for educational expenses. This means any money taken from this account that's used for tuition, room and board, school rent, books, or other school fees will not be taxed. And there's actually some more rules into it, but make sure you read the 529 publications. But all in all, that's still good. That's still good stuff. And even further, recent rulings allow the money to be used for, again, elementary and secondary schooling. So if there's a private school that can fast track your child's success, a 529 plan can help you pay for it. The only catch to the 529 plan is that, as I've said before, it is an investment plan. You only get returns on money that you've put in. So the earlier you start this, the better. Not saying that if your student is already in middle or high school that you can't use it, you just won't see the full benefits. As with all investments, time is a factor that makes all the difference. There's also usually no limit to how much you can invest per year. There are some state plans that only allow you to start putting in 10 years away from the college date, but again, you'll have to check with your individual state. Parents or anyone else that is interested in what the IRS has to say about the tax burdens of scholarships and education, they've actually released a publication, P970, that talks all about the tax benefits and repercussions of savings plans, grants, and credits. I'll put a link in the show notes. If you're interested in seeing what 529 plans are available in your area, you can check out savingforcollege.com and choose your state. After answering a few questions, they'll give you an estimated cost of tuition for the year your child will attend, which may be over a decade away, as well as some options that your specific state offers regarding 529 saving plans. Down here in Florida, it's part of the Florida Prepaid Program. Traditionally, the 529 is more of an investment plan that you manage like a mutual fund or IRA, with the key difference being that it's meant for education. However, some states, like Florida, allow you to prepay your college tuition. What that means is that you lock in tuition rates and the state manages your payments risk-free. They are acting as a de facto portfolio manager as they invest your money, but considering the steady rising of tuition rates, this is a good option for many people whose students are most likely staying in state. This plan, however, must be used within 10 years, so you don't get the same benefit as starting as early as with the regular 529 plan. If the plan goes unused, or if your student decides to attend school out of state, you can request a refund of funds paid. Minus any fees, of course. Frowny face. Florida's prepaid education site, myfloridaprepaid.com, is surprisingly helpful on shedding some light on the topic. But as always, please search for a plan in your state. Next, I want to touch on the FAFSA, or the free application for federal student aid. While this is not an actual fund, it is a gateway to funding. If you plan on receiving any federal aid, whether that's a grant or a loan, you will need to fill out the FAFSA. Even if you're not planning on using federal aid, some schools use information from the FAFSA to determine your needs for their internal money or their internal foundation or even the federally funded scholarships. So if you're planning to go to university or college at any time, it's a good idea to fill out the form. And thanks to recent rulings, the FAFSA can now be used to pay for vocational schooling as well. The beautiful thing is that they have made it easier for you to fill out the application and use tax information from your 1040 if you've completed your taxes for the past two years. You will need the student and legal guardian's social security number or taxpayer information number to fill out this form. And it's a good idea to have a snapshot of all, and I do mean all of your finances before you sit down. You'll probably spend more time gathering banking documents and choosing which schools to submit the FAFSA to, more than you'll actually spend filling out the application and answering questions. All this to say that as a student, filling out the FAFSA is one of the first things you should do in attending university. The next item for discussion is actually a new one for me, and probably for many parents out there, and that is the College Scholarship Service Profile, or CSS Profile. No connection to Internet Style Sheets. This is essentially the college boards, uh, these are the creators of the ACT, the college board's answer to the FAFSA for some select schools that found changes to the federal form to actually hinder aid dispersal, specifically from their own endowments and foundations. This scholarship profile focuses on the student, and it is expected that the student would fill it out. However, you still need guardian supporting information, tax forms, W-2s, bank accounts, etc. There is an application fee with this one. However, the fee can be waived provided the stud um provided the household earns less than$100,000 a year. The other downside is that this forum is notoriously longer than the FAFSA. Some people have numbered the questions to be over 200. So be sure to have a snack in free time when you sit down with this one. And just like the FAFSA, you have to fill out and update your application every year. Currently, a relatively small number of universities require the CSS profile, but the ones on the list are some pretty big names. And they are usually private schools, such as Yale and University of Miami. Find out if your desired school is on the list by visiting collegeboard.org. Next on the list is actually one that we all dream about. What if I told you there was an opportunity to actually get a free college? Tuition-free colleges are small in number, but they do exist. As you can imagine, their program offerings are small and student body even smaller, but for free tuition, can you complain? Some schools are like Barclay College in Kansas, a Christian college that requires you to live on campus to take advantage of the benefits of free tuition. Berea College in Kentucky, the quote, first interracial and co-educational college in the South, unquote, requires students to work on campus in some sort of facility helping capacity to get the unfinanced portion of their tuition paid off. But you get paid to work. And of course you get the work experience out of it. So that's a pretty small non-monetary price to pay for graduating debt-free. If you're considering the military, why not choose the officer route and look to one of the academies for continuing education? The Air Force Academy, Coast Guard Academy, Merchant Marine Academy, Naval Academy, and U.S. Military Academy, also known as West Point, offer tuition and in some cases also a salary to attend. However, you graduate with the knowledge and promise that you'll serve several years in the role you trained for. US Best News has a more extensive list of free tuition programs that I'll link in the show notes. Again, make sure you check the programs that are offered before you commit yourself to a college. The last thing on my list for today is work or corporate funded education. Larger companies such as UPS, Amazon, and Coca-Cola also offer tuition assistance. I believe the reason for this is that the larger companies are seeking to nurture talent and keep them for the long term, which does end up saving the company money, and building rapport with not only the employees, but with the people who purchase from these companies. These programs are often heavily sought after, but many people don't glorify the work that's involved to get there. For example, there are probably many of you that would not consider working at Walmart, even part-time, as a top choice. However, Walmart's Live Better You program ensures associates that work at Walmart from day one that they will be eligible for certain certificate and bachelor's degrees programs either for free or at a huge discount. Starbucks. Starbucks offers the opportunity to earn your first bachelor's degree online from Arizona State University, with a promise to have full support to balance work, life, and school. Again, those are only online degree programs, so they tend to be a lot more flexible to the working student. I'm sure you could also probably get a free Cafe Mocha or two along the way as well. So be sure to check in your local area for any companies that offer educational opportunities. That's all the time we have for in today's episode. For in today's episode? That's all the time we have for today's episode. But I'm going to give you a homework task. Write down five companies that are either in your current area or in the area that you are your student want to go to college in, and then see if they offer tuition reimbursement or tuition assistance program. This may seem like a dis like a difficult or a necessary task, but a little bit of research goes a long way. Plus, push come to shove, you could always just ask Siri or Jim and I to do it for you. Be sure to subscribe or like or press the thumbs up or however you subscribe to your podcast, so you can catch the next episode on funding options. Again, we're gonna cover a few more, including scholarships and how to best do your college scholarship search, so you won't want to miss it. Until next time, set your goals, do the daily work, and of course, keep thinking ahead of the