Financial market fluctuations can hit at less than ideal times and for those with students heading off to college in coming months, the shifts can be unsettling.
Here are five practical steps you can consider taking to lessen the blow, make the most of your available resources, and keep your child’s education goals on track.
1. Seek Professional Support
If you have a trusted financial advisor or other professional helping you with your investments, check in to see what advice they have to offer. Check in as well with financial aid professionals at your child’s desired school(s) to see whether additional aid may be available if market loss is part of a larger financial change in your household—such as job loss or other economic hardship. You can request a professional judgment review to see if your child may qualify for additional financial aid. Inquire about any tuition payment plans the school may offer that break up the total cost into monthly payments rather than requiring a large lump sum payment at the start of each semester. These plans can have low or no interest and can buy your investments time to recover while still keeping your student on track.
2. Focus on Immediate Needs
Be certain to carefully review exactly what expenses need to be covered and when. Focus on the most immediate need, such as an initial deposit, and determine what funds you may have on hand that could be leveraged for this. If other expenses like tuition, housing, and meal plans for the upcoming semester can wait to be paid, consider putting the brakes on making those payments while you assess what options you have.
If a 529 plan withdrawal is essential, consider withdrawing only what’s necessary in the near term. Be sure to take a careful look at the value of your current investment options, if you have more than one, to decide which one(s) may be best to withdraw from at this juncture. If you have sufficient funding in an option that has held or increased its value, you may want to consider tapping that first. This could help you to avoid locking in losses and could provide the remainder of the account time to potentially recover as the market stabilizes. A tax or financial advisor may be able to help you with these decisions if you need support.
3. Temporarily Use Other Available Financial Sources
If you have access to other liquid funds—such as a savings account, a tax refund, or upcoming commission or bonus through your job —it might be worth covering part or all of the upcoming semester with one or more of these alternative resources. Avoid utilizing resources like retirement accounts, however, where withdrawals may come with penalties or adverse tax consequences. And don’t deplete your emergency savings as those funds may be needed for other purposes.
As another short-term strategy, consider student loans while you wait until the market improves. When your 529 account recovers, you can use it to repay up to $10,000 in student loan debt. And don’t forget about other family members who may have saved on your child’s behalf or who may be more than willing to help with a funding gap at this time to ease the financial pressure you are facing.
4. Consider Lower-Cost College Alternatives
Given the extent of impact on your investments, now might be the time to explore or revisit more affordable education options—at least temporarily. Community colleges, in-state public universities, or regional campuses may offer lower tuition rates without sacrificing academic quality and depending on location, may allow for your child to live at home to cut down on costs. Many students start at a community college and transfer to a four-year institution after completing general education credits, potentially saving thousands.
Or as an alternative, find ways to cut costs in other areas at the institution your child has planned to attend. With tuition as a fixed expense, look to lower overall costs by choosing a less expensive meal plan or housing arrangement, renting textbooks instead of buying them, and/or looking for student employment opportunities on or near campus for the upcoming semester. Every dollar saved through a re-examination of options and every dollar earned through student employment can reduce your financial pressure and help stretch your family’s college resources.
5. Keep A Positive Perspective
Even if your 529 account or other investments are down in value, remember that you’ve done something many families haven’t—you’ve planned ahead and have some resources to rely on. That gives you a much stronger foundation than starting from zero. Whether you’re intending to pay for one or more years, half a year, or just books and fees, your savings will make a difference. Whatever portion of your child’s educational costs you cover will help set your child up for a successful future with less debt.
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