The College and School Counseling Department at Saint Joseph Academy (SJA) held a College Financial Planning Night event on May 3 at the SJA Media Center. John Iacovelli of the New Jersey Higher Education Student Assistance Authority (HESAA) and Daniel Armas of Gold Family Wealth were guest speakers of the event to talk to parents about learning about financial aid trends and methods as well as helping them to think about saving for their child’s financial future in regards to college and retirement.
Iacovelli began the presentation about the cost of tuition in colleges ten years from now. He noted that tuition and fees at private universities will increase by approximately 50 percent while the increase for state colleges will be slightly less. A statistic that Iacovelli shared was that tuition and fees at Ivy League schools average $59,961. This helped set the stage for what parents should consider when planning for their child’s education financially. A few things to consider when planning is to be aware of how many children you have, setting realistic and attainable goals and sharing your plan with family members.
Armas spoke on developing a financial plan and spoke on learning your budget principles in order to attain your long term goals and to also differentiate between your wants and needs. Armas used an example comparing brewing homemade coffee as opposed to buying coffee from Starbucks when trying to maintain a budget.
All of this ties into understanding the power of time and compounding. Armas suggested to parents to look into investing money today and in time, the money can grow. When wondering how fast someone’s money can grow, Armas discussed the rule of 72 and explained it by saying that if the interest rate is ten percent, divide it by 72 and it’ll take 7.2 years for someone’s investment to double.
“If someone invested $1,000 today and using that 7.2 percent that I mentioned? In 50 years, it grows about $32,000 ($32,339 to be exact) but if we stop that clock ten years early, it’s the same $1,000 growing but ten years shorter, that money will grow to half the value ($16,135),” Armas said.
The presentation then transitioned to developing a personal financial plan. When developing a personal plan, one should take care of their future self first in the long term, protect against catastrophic risks such as death in the family, always aiming to save at least ten percent of income for retirement or long term and taking advantage of Employer Matches such as 401(k).
There are different account types to consider such as bank accounts for kids, Uniform Transfers or Gifts to Minors Act (UTMA/UGMA), Coverdell Education Savings Account (ESA) and Roth IRA. UTMA/UGMA accounts allow minors to receive gifts without guardian aid and once they turn 18, they get full control of the money. Bank accounts under a child’s name can affect financial aid calculations as it can be determined to be used towards a child’s education when applying for financial aid. The most popular account is the 529 College Savings Plan, which is flexible as it offers tax advantages, control over investments and can choose a state for the plan.
Iacovelli discussed the NJBEST 529 College Savings Program, which was created in 2003. It offers federal tax advantages and state tax deductions for incomes below $200,000. Other benefits include matching grant for new accounts with adjusted gross incomes below $7,500, which can go up to $750. NJBEST scholarships are offered for accounts that open four or more with at least $1,200 saved and for fully mature accounts of 12 years or more with $3,600 saved can receive a scholarship of $3,000.
When relying on financial aid, parents should understand the Free Application for Federal Student Aid (FAFSA), private sources of aid and college loan programs such as the Federal Direct Loan Program. When looking through private sources of aid, Iacovelli recommended fastweb.com, which is a free scholarship search service designed to connect students to scholarships that can benefit affordable tuition.
Iacovelli also urged parents and impending college students to consider a value based approach in college selection with the following factors: prestige vs. value schools, intended majors vs. school reputation and knowing the product you’re saving for. He used different majors as an example by listing schools that students can attend in the state, even though one may look at prestigious schools. If one were to major in pre-med, Iacovelli suggested The College of New Jersey (TCNJ), Rowan University for engineering, Stockton University for nursing and Rider University for business due to the cost effectiveness as opposed to schools such as Duke University, Harvard University and others where the costs may be higher.
Parents and students who have any questions for financial planning for both their children and themselves can contact both Iacovelli and Armas. You can reach John Iacovelli at (267) 566-0072 and john@collegequestnow.com and Daniel Armas at (646) 844-2533 or (732) 695-4520 and darmas@goldfamilywealth.com.