Sending a child to college can be exciting, stressful and certainly busy. There are a great many things to do before college, running the gamut from obtaining the necessary (and perhaps whimsical) things to furnish a dorm room to choosing the right meal plan. Often overlooked are some basic financial and personal items that, if missed, can make your and your student’s life more difficult. Before sending your child off to college, don’t forget the following important considerations.
Saving for College
Saving for college is a significant and sometimes complicated task. It is never too early to start. Although this article addresses things to do before going off to school, it is important to note a few strategies about saving in advance of that day.
- Take advantage of tax-favored savings vehicles like a 529 Plan. Saving funds in a 529 Plan allows tax-deferred growth until the funds are withdrawn. Funds withdrawn and used to pay “qualified higher education expenses” (as defined in the Internal Revenue Code) are not subject to income tax.
- Family members can create and fund trusts, the terms of which can allow the trustee to pay educational expenses for children, grandchildren and more remote descendants.
Paying for College
No doubt, college can be expensive. While there are many ways to pay for college (not all of which can be listed here), below are a few methods to consider. In addition to financial aid and loans, it pays to do your homework and look for less-common sources of funding.
- Complete a FAFSA form. The FAFSA form is the gateway to financial aid, grants and many student loan programs. Many factors are considered when determining eligibility for financial aid. Don’t assume you or your student won’t qualify. Start here:
- Family funding. Of course, savings set aside by the student, parents and grandparents can be used to pay for college education. Remember, qualified tuition payments can be made directly to the educational institution on behalf of the student gift tax free. Non-qualifying payments to the student in excess of the annual exclusion amount (for 2023, $17,000) will be subject to the gift tax and will consume gift tax exclusion or cause a gift tax.
- Merit and competitive scholarships. Schools and other organizations offer scholarships to high-achieving students or to students who win competitions. Your scholar should seek these out and compete.
- Private scholarships. Religious and fraternal organizations, clubs and special interest groups often offer scholarships to the children of their members or the general public. Often these scholarships are small and require special qualifications, such as meeting the unique criteria established by a family in the memory of a deceased loved one. In some cases, the applicant pool may be small, so your student may have a better chance of qualifying. Research is required here; there may be many different application deadlines, but diligence could win the student a few thousand dollars each year, perhaps enough to offset the cost of books, lab fees and other college necessities.
Necessary Documents and Other Financial Matters
Once your child attains age 18, they are an adult competent to make their own decisions. This also means that, legally, your parental ability to make decisions for your child ceases. Without the appropriate permissions in properly executed documents, you may be cut off from assisting your child in an emergency or even with everyday basics.
- Healthcare Power of Attorney / Healthcare Declaration / Healthcare Proxy. Once your child reaches age 18, privacy laws, such as HIPPA, prevent you from accessing your child’s medical records. Should your child have a healthcare emergency, without proper authorization you may not be able to communicate with your child’s healthcare providers. Healthcare authorizations are governed by state law and have many different names. Before going off to college, be sure your child signs a form compliant with your home state’s law and another form compliant with the laws of the state where your child attends school. Be sure the form has appropriate HIPPA privacy waivers. Consult an attorney in your home state and the state where your child will go to college with respect to these documents.
- Durable Power of Attorney. As with healthcare information, you may be prevented from accessing your child’s personal information after your child’s 18th birthday. A durable power of attorney allows you to act on your child’s behalf in many personal transactions. Be sure the power of attorney specifically takes into consideration federal privacy laws with respect to higher education records and also digital assets (such as social media accounts). Consult an attorney in your home state and the state where your child will go to college with respect to this document.
- FERPA Waivers. The Family Educational Rights and Privacy Act (FERPA) protects the privacy of student records. When your child reaches age 18, the privacy rights belong to the student. Generally, and subject to limited exceptions, schools must have written permission to release student records. If you would like to review your child’s academic records or discuss your child’s academic performance with the school, you child must grant you written permission to do so in a FERPA waiver. Although the U.S. Department of Education’s website has model forms and guidance, you should consult your attorney with respect to this document.
- Money Matters. Be sure to have a way (or two) to provide your child with quick and easy access to funds. Perhaps a shared bank account (to which you can easily deposit funds), access to a credit card or simply a deposit to the child’s account. Your PNC Private Bank® banking advisor can help you arrange one or more ways to get your child funds.
- Health Insurance. Be sure your child has adequate health insurance. Health care is expensive and accidents or injuries do happen. If your child is an insured under your health insurance policy, determine if your policy will fully cover your child when living out of state (including overseas, if your child is studying abroad). Your child may need additional insurance to supplement your own policy. Remember, after your child attains age 26, you cannot maintain the child on your policy of health insurance.
There are many things to consider before college begins. Below are two suggestions that may help keep your college student safe while away from home.
- Contacts. If your child’s college is a great distance from home, do you have relatives or friends near the school? If you work for a company with offices in many locations, do you have a colleague near your child’s college? In an emergency, a contact close at hand is an invaluable resource for your child.
- Safety. It seems as if the news is full of horrible stories. It is important to have the “safety” conversation with a young person going off to college. Of course, children often do not listen to their parents. Perhaps a conversation with a local police officer, school official, upper classman or relative, or some other trusted person would be more impactful. It may even be appropriate for your child to enroll in a personal safety course before heading off to school.
Tightening the “Nuts and Bolts”
Sending a child off to college is one of life’s great milestones. In all the excitement it is easy to forget things. Tightening a few practical “nuts and bolts” before your child goes off to college can help your child have the resources necessary for a successful college experience.
For more information, please contact your PNC Private Bank advisor.