Time for Graduation! Don’t be Surprised by College Expenses.

It’s graduation season!

Many college graduations are currently taking place, and high school graduations are right around the corner as well. My wife, as a teacher, is a little saddened each year to see this year’s seniors walk across the stage and move on to the next chapter of their lives. For some students, their next step is a college education. Whether it be out-of-state or in-state, the price of a college education could be at the forefront of any parent’s mind.

With a 3-year-old and a 1-year-old of our own, it is never too early to begin thinking about how we will fund their college education.

For the 2023-2024 school year, the average cost of one year is as follows:

• Four-Year In-State Public - $28,840
• Four-Year Out-of-State Public - $46,730
• Four-Year Private - $60,420

While this number includes tuition, fees, room and board, books, transportation, and personal expenses, it is a large amount of money. AND still increasing each year.

No one can predict what college may cost in 5, 10, or 15 years, but historical trends indicate expenses could increase 3% to 5% each year. Here’s an idea of what college expenses may look like if we increase by 5% each year:

How can you plan for an expense that, second to buying a home, might be the biggest purchase you make?

Focus on your Savings

The more you save now, the better off you’ll likely be later. Starting earlier allows for the amount to compound and grow over a longer time frame. Albert Einstein said, “Compound interest is the 8^th wonder of the world.” Start with whatever you can afford now, and add to it over the years with raises, tax refunds, and any other unexpected amounts received.

College Savings Options

• 529 Plans
  • Earnings are tax-deferred
  • Certain States have plans where contributions can reduce State Taxable Income
  • Withdrawals are tax-free at the federal level if the money is used for qualified education expenses.
  • A 529 Savings Plan is similar to a 401k plan where you direct your contributions to one or more of the plan’s investment portfolios.
  • A tuition plan purchases college tuition credits at today’s prices for use in the future.

• Custodial Account (UTMA)
  • Account is in your child’s own name, with an adult being a custodian.
  • All contributions to the account are irrevocable gifts to your child.
  • When your child turns 21 (Georgia state law), your child will gain full control of the account and can use the money for whatever purpose they choose.
  • Earnings and capital gains generated by the account are taxed to your child each year under the “kiddie tax” rules. Under kiddie tax rules, a child’s unearned income over a certain threshold ($2,500 in 2023) is taxed at parent income tax rates.

Georgia Specific:

HOPE/Zell Miller Scholarships

• HOPE
  • An estimated 85% of tuition expenses are paid for if attending a Georgia university, technical college, or private college.
  • One of the eligibility requirements includes graduating from a HOPE-eligible high school with a minimum 3.0 grade point average.
• Zell Miller
  • 100% of tuition expenses paid for if attending a Georgia university, technical college, or private college.
  • Eligibility is more stringent needing to meet all HOPE eligibility requirements as well as having a grade point average higher than 3.70 among other requirements.
  • If eligible for the Zell Miller Scholarship, you cannot also receive the HOPE Scholarship

Thank you for your trust and confidence in us and for giving us the opportunity to educate you on your financial journey.

As always, thank you for the introduction of your family and friends over the years. We are honored to serve you! As a service to our clients, we are happy to act as a sounding board for your friends and family. If any of them should need a second opinion on their financial situation, introduce them to www.striblingwhalen.com or call us at 678-989-0048.

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Regards,

Sources:

https://www.gafutures.org/hope-state-aid-programs/hope-zell-miller-scholarships/zell-miller-scholarship/eligibility/

34134104122024_105943.SingleDoc.pdf (broadridgeadvisor.com)

Investors should consider the investment objectives, risk, charges and expenses associated with 529 plans before investing; specific plan information is available in each issuer’s official statement. There is the risk that investments may not perform well enough to cover college costs as anticipated. Also, before investing, consider whether your state offers any favorable state tax benefits for 529 plan participation, and whether these benefits are contingent on joining the in-state 529 plan. Other state benefits may include financial aid, scholarship funds, and protection from creditors.

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