By Justin DeBrosse | Manager of Service Delivery | The Financial Clinic
Education is expensive!
Now that we’ve gotten the obvious out of the way, let’s dive into the details. According to Deloitte’s 2018 Back to School survey, the United States will spend an average of $510 per household on back to school spending this year, and College Board reports that the average cost of college tuition for the 2017-18 academic year was $9,970/year for public four-year schools and $3,570/year for public two-year schools. Forbes reports that student loan debt has ballooned to more than $1.5 trillion, with new graduates finishing college with anywhere from $20,000 – $36,000 in debt.
Preparing for the cost of education, whether it’s your children’s next year in the k-12 system or college (or your own!), is more important than ever as the repercussions of educational debt can be long lasting. Below you’ll find some information and resources that should be helpful in preparing for upcoming educational expenses, whether they’re next month, next year, or even farther into the future.
When you have little time to prepare for back-to-school expenses, the best action to take is to think forward. If you’re in college, you probably have at least one more semester to pay for tuition, room & board, textbooks, and other expenses. And for those of you with children in school, all kinds of expenses pop up throughout the school year: clothes and shoes for school sports, school pictures, supplies for projects, and so on. Begin saving what you can now to prepare for the future.
Saving for education expenses is a great goal no matter how much time you have. One of my favorite tools to map out your major expenses and your plan for saving for them is the 5 Steps To My Goal worksheet from Change Machine. It- allows you to determine how much you need to set aside each week to save for your goal. You’re also able to track multiple goals at once. If you’re having trouble thinking of upcoming educational expenses, here are a few examples that might apply to you:
- School pictures
- Fees/dues for clubs and sports
- Jerseys or other clothing for sports
- Supplies for school projects
- General school supplies
- Textbooks and supplies
- Fees/dues for clubs and sports
- Transportation and parking fees
- Technology and software
6 months – 1 year
When you have more time to plan ahead, saving becomes even easier. You’re able to save less each month to reach your goal since you’re saving over a longer period of time.
For those of you preparing for college, this is also when you want to begin looking into financial aid. The Free Application for Federal Student Aid (FAFSA) can be completed between October 1 – June 30 for the upcoming school year. Completing the FAFSA will allow you to determine what federal and state financial aid you are eligible to receive. Financial aid comes in the form of grants (financial aid that doesn’t have to be repaid), loans (financial aid that must be repaid after finishing or discontinuing your education) and work-study (a program where you work during school to pay for your education). For more information on different types of aid, check out this page on the FAFSA website.
For more information on the FAFSA and financial aid, click here.
More than a year
Opening a 529 for yourself or your children is a great idea when you’ve got more time to prepare. A 529 plan is an investment account for education savings which carries tax benefits to help your money grow more quickly than traditional savings accounts, and many states allow you to deduct 529 contributions from your taxable income. Depending on which state you live in , you may even be able to split your state income tax refund and deposit a portion of your refund directly into a 529!
- The following tipsheets from Change Machine provide more information about 529s
Consider starting at a community college. As you can see from the data reported at the beginning of this post, community college is significantly cheaper than jumping straight into a 4-year school. Based on the reported data, you could save almost $13,000 by attending a community college for the first two years of college education! More than anything else, do what you can to avoid taking out more student loans than you have to. For many loans, interest accrues while you’re in school, and money spent repaying loans is money that can’t be saved for a home, retirement, or whatever other goals you might have. That being said, there’s a good chance that many of you will need to take out some sort of student loan to get through college.
For more information on student loans and paying for college, check out these Change Machine tipsheets:
Other tips and tricks:
- Tax free weekends
- Around the beginning of the school year, several states have “tax free weekends” in which clothing and school supplies can be bought without paying sales tax up to a certain price, allowing you to get more for your money. In Ohio, this year’s Tax Free Weekend was August 3-5. Shoppers paid no sales tax on clothing at $75 or less per item and school supplies or instructional materials at $20 or less per item. Tax free weekends are typically geared towards families with children going back to school, but you are not required to have children in school or be in school yourself to benefit. Here’s a list of many of the tax free weekends around the country.
- Rent textbooks, buy used, or borrow them from the library
- College textbooks are very expensive! College Board reported an average cost of over $1,200 for textbooks in the 2017-18 academic year, while the National Association of College Stores reported an average of $579 spent on textbooks for the 2016-17 year, significantly less than College Board, but still a substantial amount of money. To save money, consider renting textbooks instead of buying them. While you aren’t able to resell textbooks that you rent, renting is much cheaper than buying new textbooks, and still cheaper than used textbooks in most cases.
- If you’re really lucky, you may be able to borrow your textbook from the library. However, you’ll have some steep competition, as you won’t be the only one with this idea. And even if you are able to get ahold of a book, you likely wouldn’t be able to keep it the entire term.
- If you’re determined to purchase your textbooks, always buy used. Resale value is questionable at best; textbook publishers frequently release new editions of textbooks, making previous editions nearly worthless.
- Use back-to-school shopping as a teachable moment for your children.
- Back-to-school shopping is an excellent opportunity to take a step back and teach your children a little about budgeting and spending money. Come up with a shopping list and a budget for this year’s school supplies, and work with your children to keep track of what they’ve purchased, how much they’ve spent, and what’s left while you shop.