Planning

College savings is meant to fill the gap between the cost of college and whatever amount of financial aid the student might receive. How do we capture this information? We combine the traditional savings calculator with the needs analysis process.

Using the traditional calculator, determine what college is going to cost X number of years from now.
Determine, based on a given annual cost of living adjustment and appreciation rate, what the parent’s income and assets will be at that same time in the future.
Using a Estimated Family Contribution (EFC) calculator determine the student’s EFC.
Compare the future cost of education to the EFC. If the EFC is less, subtract it from the cost. The difference is need-based financial aid eligibility, the remainder is the family’s cost. If the EFC is greater than the cost, there is no need-based aid in the student’s future.

This information allows us to make some judgment calls. First, the remainder would be their dollar goal in terms of investing—the family’s cost after aid. Based on this they can go back to the traditional calculator to determine their monthly savings goal. And it is just that, a goal; they should not put retirement savings at risk. What parents want is to have financial options when it comes time to pay for college. Even a small educational nest egg is better than none.

Second, and most importantly, it gives parents the guidelines they need to determine where best to invest their college savings. It’s important for parents to remember that whatever investment strategy they choose will ultimately have consequences in terms of taxes, rate of return vs risk, and financial aid eligibility.

Campus Financial estimate your student’s financial aid eligibility quickly, providing the basis for a practical investment strategy.