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Class #5 Notes: The Basics of College Planning

Over the past five weeks, we’ve taken you back to school (virtually) and covered a variety of topics including: Understanding And Taking Control Of Your Finances, Managing Your Debt, Investing 101 – The Basics, and How To Prepare For A Home Purchase. For our final class, we tackled the topic of college planning. Not every family is in the same stage of preparing for college, so we covered several key topics depending on if your loved one is years from college or on their way to campus.

Throughout our webinar, we touched on various tips on college planning made simple:

Understand If College Savings Should Be a Priority
Common advice is, there’s no time like the present to start saving. Even starting with a small amount each paycheck could make a dent when you’re looking at a tuition bill 10 or even 18 years down the line. At the same time, saving for college should not be the No. 1 priority if you have more pressing financial goals. We discussed our Get Your Money Right Checklist, which includes: starting a crisis fund, getting a match, protecting your income, attacking bad credit, starting or having an emergency fund, saving 15% for retirement, saving for other goals or saving for college, and paying down good debt.

Understanding How Much We Need To Save:
It’s never too early or too late to start socking away money for a college education. If you can afford it, the earlier you start, the better. Getting a head start gives your money more time to grow over the long term and rebound after any dips. In our webinar, we touched on every dollar you save is a dollar not borrowed and owed plus interest. Understanding early on the various types of college and their tuition is crucial. For example, does your child plan to attend a public school or a private one? Will it be a two-year program or a four-year one? The costs associated with each kind of institution and program can vary widely. so it’s important to read up on the fees and have a solid understanding.

Diving Into 529 Plans:
The rising costs of college means an increasing need to plan ahead for financing educational dreams. One way to save for college tuition is through a 529 plan, named for the relevant section of the federal tax code. What is a 529 plan?

Also known as a “qualified tuition plan,” this is a type of savings account that allows contributions to grow through investment tax-free. Once withdrawals start being made, there will be no tax on the earnings as long as the funds are used for qualified educational expenses. There are two kinds of 529 plans, and nearly every state offers at least one. The first is called a prepaid tuition plan, which allows you to buy credits at certain colleges and universities at today’s prices to be used for tuition and fees in the future. Such plans are usually available only at public schools and for in-state students. The second type of 529 plan is an educational savings plan, which comes with flexible contributions – meaning you can save monthly, quarterly, annually, or deposit a lump sum.

Not all 529 plans are created equal. When trying to find the best 529 college savings plan, you may want to think about the tax benefits and the fees.

Considerations for Those with Loved Ones Closer to Entering College:
When deciding on a college, we encourage our members to look at the “net price” and not the “sticker price,” as well as graduation rates and starting salary for the intended major. Outside of tuition fees, it’s important to understand other financial factors that are associated with college, including:

•  Textbooks and supplies: Estimate expenses for basic supplies in addition to books.

•  Room and board: Plan out where the student will live and how they will eat. The costs will be different for on- and off-campus housing.

•  Transportation: Figure out how the student will get around. and be ready to cover bus fare, gas, insurance, etc.

•  Discretionary: Determine how much the student will have for clothing, entertainment, etc

SoFi & Edmit Partnership:
Earlier this year, SoFi and Edmit, the company that helps families make smarter financial decisions about college, announced a partnership to equip college-bound students and their families with tools and resources needed to make the college selection and financial aid process easier, personalized, and transparent. Registered SoFi members will now have complimentary access to Edmit Plus, which is a tool that considers a student’s academic merits and family finances to provide data-driven recommendations on college affordability and return on investment. Taking advantage of resources, like this partnership, is a great way to further educate yourself on all aspects of college planning.

Now that we’ve wrapped up our final webinar, I’d recommend checking out other SoFi tools including their student loan calculator. This calculator estimates how much you could potentially be paying each month so you can better prepare for any upcoming bills.

We hope that you enjoyed learning with us over the past five weeks. If you missed any of our sessions, we encourage you to check out our recaps for each: Understanding And Taking Control Of Your Finances, Managing Your Debt, Investing 101 – The Basics, and How To Prepare For A Home Purchase. And remember, if you want to learn more on college planning, or any of the other topics we’ve covered, SoFi members can schedule a session with any of our SoFi Financial Planners here. They will be happy to help you plan this next major financial milestone.

Thanks again for joining us over the past five weeks!

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The information provided is not meant to provide investment or financial advice. Investment decisions should be based on an individual’s specific financial needs, goals and risk profile. SoFi can’t guarantee future financial performance. Advisory services offered through SoFi Wealth, LLC. SoFi Securities, LLC, member FINRA / SIPC .

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SoFi Student Loan Refinance
If you are a federal student loan borrower, you should consider all of your repayment opportunities including the opportunity to refinance your student loan debt at a lower APR or to extend your term to achieve a lower monthly payment. Please note that once you refinance federal student loans you will no longer be eligible for current or future flexible payment options available to federal loan borrowers, including but not limited to income-based repayment plans or extended repayment plans.

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ABOUT Brian Walsh Brian leads the financial planning team at SoFi and is a CERTIFIED FINANCIAL PLANNER™ professional. As a self-proclaimed financial planning nerd, he leverages research, member feedback, and past experience to deliver advice that is both meaningful and practical.

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