It's a good idea to revisit your progress on college savings at least once a year. You might choose to do it around tax preparation season when all your financial information is already gathered or another time that works better for you.
Here are a few to-dos to ensure accounts set aside for college expenses are on track.
1. Understand total amounts needed.
If you have a high school student, a good starting place is the net price calculator for colleges your student is interested in. To find the calculator, search online for the college name and “net price calculator.” Not all colleges treat the calculator the same, so be sure you understand what it takes into account.
If your student is already in college, you have a good idea of costs. Be sure to consider increases in tuition costs as well as changes like moving off campus or enrolling in classes with extra fees for future years.
Use the College Funding Forecaster to estimate total costs over four years.
2. Estimate your expected family contribution (EFC).
Colleges use the information you provide on the Free Application for Federal Student Aid, or FAFSA, to calculate your EFC, or the amount your family is expected to be able to contribute to your student's college costs, and available aid. Although each institution comes up with its own EFC based on your financial information, you can use the FAFSA4caster to estimate a number.
Important things to keep in mind:
- Your EFC is what colleges expect you to be able to pay and may not reflect certain circumstances that will prevent you from paying that amount.
- Many colleges do not meet full need, or provide financial aid to cover any gaps between costs and your EFC.
- Financial aid offers from colleges and universities often include federal or institutional student loans, as well as federal loans for parents. These amounts will need to be repaid with interest if you or your student accepts them.
3. Calculate available savings and earnings.
Assess how much you and your student have already put away for college. Don't forget about accounts or savings vehicles owned by or receiving contributions from relatives. Some typical college savings accounts include:
- 529 plans, also called college savings accounts
- Education Savings Accounts, such as Coverdell
- Savings accounts
- Savings bonds
- Trust funds or other inheritances or gifts
Now consider earnings (your own and your student's) that will be earmarked for college. Be aware that your student's college may also assume your student will earn a certain amount each year in school when providing a financial aid offer.
4. Understand how college funding works.
Be sure you understand what types of expenses each of the college savings vehicles cover. You may be able to claim only tuition expenses, or you may receive reimbursements for a variety of qualified expenses, including off-campus housing, food and technology.
You should also clear up any questions on how to claim benefits. Do you need to keep receipts and ask for reimbursement, or will amounts be paid directly to your student's college? Be aware that a financial aid offer from a college may also assume a certain amount of student earnings each year.
5. Consider changes.
Depending on when you started saving for college, your college investment strategy should change with your student's age and education goals. Now is a good time to consider your current options and possible changes.
Check savings bonds for maturity dates and current vs. expected value. It may also be time to convert funds from one vehicle to another. A financial or plan adviser can provide more information about investment options, tax implications and other considerations.