As the thrill of high school graduation fades, the countdown to college move-in day begins. While your soon-to-be college student busily selects dorm decor and registers for classes, parents have a crucial task at hand: finalizing finances.
To help create a smooth transition and avoid last-minute stress or unnecessary fees, here are four essential financial steps parents can take before their student heads to campus.
1. Review Financial Aid Packages
By this point, you have likely received your child’s official financial aid package. Take the time to review it carefully. Distinguish between “free money” (such as scholarships and grants) and “borrowed money” (like student loans). Subtract the total financial aid from the university’s comprehensive Cost of Attendance (COA), which includes tuition, fees, housing, and meal plans. The remaining balance is your “net price,” which represents the estimated amount your family will need to cover out of pocket. Understanding this figure is essential for effective financial planning.
2. Be Aware of Payment Deadlines and Set Up Plans
Colleges and universities often operate on tight schedules, even during the summer. Fall semester tuition bills are typically issued in July, and payment deadlines can fall as early as late July or August. Missing these deadlines can lead to significant late fees or even the immediate cancellation of your student’s class registration. If you cannot cover the net price upfront, explore the college’s interest-free monthly payment plans. These options can allow families to spread costs over several months for a nominal enrollment fee.
3. Manage 529 Distributions
If you have been saving in a 529 college savings plan, it’s crucial to coordinate your withdrawals strategically. Keep in mind that to enjoy tax-free distributions, the funds must be taken out in the same calendar year the qualified higher education expenses are incurred.
You will also want to find out whether your plan allows direct payment to the university or whether funds must be routed through your personal bank account first. Lastly, it is important to keep thorough records of all receipts for tuition, books, required technology, and other qualified expenses.
4. Finalize Federal or Private Loans
If loans are required to bridge any remaining financial gaps, it can be helpful to secure them by mid-summer. Direct federal student loans in your child’s name generally offer the most favorable terms and consumer protections. In cases where parents need to borrow through a Federal Direct PLUS Loan, remember that a standard credit check will be required.
Getting these loans sorted early on can help alleviate financial worries and streamline the process as your student prepares for college.
Conclusion: Preparing for a Smooth Transition
As your family embarks on this exciting new chapter, it’s normal to feel a mix of emotions, from enthusiasm to a bit of anxiety. By taking the time now to address these financial steps, you can help create a more seamless transition to college for your student. Every piece of preparation not only helps avoid potential stress but also allows you to focus on what truly matters: supporting your student as they take their next big leap.
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Marshall Clay CFP, J.D., is a Partner and Senior Advisor at The Welch Group, LLC, specializing in providing Fee-Only investment management and financial advice to families throughout the United States. Marshall is a graduate of the United States Military Academy in West Point, New York, the Cumberland School of Law in Birmingham, Alabama, and is a CERTIFIED FINANCIAL PLANNER™. In addition, Marshall is a frequent guest on local television stations as an expert on various financial planning matters.
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