College Funding

Planning for college


If your goal is to help fund your child’s education at a four-year college – either public or private – be aware that the costs of tuition, fees, and room and board continue to increase each year, averaging 2.2% annually in the last 10 years.1 The cost of college will likely rise in the future, so it is important to begin planning for it as soon as possible. The more time you have to implement a college funding plan, the more options you’ll have available to you.


Below are the costs of different types of four-year colleges, according to a recent survey by the College Board.2 Keep in mind these costs are for tuition, fees, and room and board for only one year. Multiply these numbers by four, and that will give you an approximate idea of how much money a four-year degree could cost.


2020 average cost for one year of college


$21,950                                                 $38,330                                                 $49,870

Public 4-yr in-state                          Public 4-yr out of state                  Private 4-yr Nonprofit


Create a college funding plan


Everyone has different needs, different resources, and different time frames in which to create and execute a college funding plan. For many of us, a great starting point may be to simply begin a college funding plan by following a rule of thirds:


The Past, Present & Future Rule of Thirds


• PAST – money from your savings over time

• PRESENT – money from your current income

• FUTURE – money obtained through loans


The college funding rule of thirds


PAST (Savings)


There are many ways to save for college. Let’s take a closer look at three common college savings vehicles:


• 529 plan – A 529 plan is an investment vehicle designed to help parents and families save for future higher education costs – on a tax-advantaged basis – for a designated beneficiary. 529 plans are administered by the individual states, with each state having a different plan and different tax advantages.


Generally speaking, earnings in a 529 plan are not subject to tax when used to pay for qualified education expenses for the designated beneficiary, such as tuition, fees, books, and room and board. Contributions are not tax-deductible for federal tax filing, however the contributions may be tax deductible at the state level.4


• Coverdell education savings account – An investment vehicle designed to help families save for elementary, secondary, and higher education expenses. Like many 529 plans, contributions are not tax-deductible for federal tax filing. Annual contribution limits also apply.


• Bank and investment accounts – Savings accounts, CDs, and investment accounts (such as mutual funds and brokerage accounts) can be used to help you save for college tuition.


PRESENT (Current income)


Chances are, you’ll pay a good portion of college expenses out-of-pocket. Below are some considerations on using current income for college:


• Consider these expenses regular household expenses and add them to your monthly budget.


• Inquire about the school’s monthly payment program – Many colleges offer a monthly payment plan for tuition, fees, and room and board.


• Some income tax credits or tax deductions may be available to

you for qualified education expenses. Speak with your tax advisor to see if you qualify.


FUTURE (Loans)


All student loans are not the same.


• Private loans are issued by private companies and closely resemble a personal loan. Eligibility is often dependent on your credit score.


• Government loans may have lower interest rates and more favorable terms. Eligibility is determined by a federal student aid application.


• Permanent life insurance provides lifelong insurance protection. The death benefit can be used to help pay for a beneficiary’s education should the insured pass away. And, if the policy is designed to accumulate cash value, it can provide a source of money from which to borrow.5


Free Application for Federal Student Aid6


FAFSA is a free online application that determines an individual’s eligibility for federal financial aid. The aid offered through FAFSA includes government loans, grants, and work-study programs.


Federal aid is not distributed to you or the student directly. Instead it is provided to the college.


The college will use your federal aid eligibility (EFC) and combine it with their own aid and/or merit scholarships to create a total financial aid package that includes federal aid loans, grants and work-study:


Direct Loan – Federal loan that may be subsidized (government pays loan interest while student is enrolled) or unsubsidized (you pay interest at all times).


Pell Grant – Federal grant (does not have to be paid back) that is available to undergraduate students. Will need to be reapplied for every year.


Work-Study – Federal program that provides part-time jobs for students with financial need, allowing them to earn money to help pay education expenses.




The FAFSA online application and your calculated EFC can be an arduous process, but for the financial assistance it represents, it could be well worth the effort.


What is EFC? FAFSA collects all your financial information and uses a complex calculation to determine how much you will be able to pay toward college. This amount is your Expected Family Contribution, or EFC. Oftentimes your FAFSA calculated EFC will be much higher than what you can actually afford to pay.


Options for decreasing cost


Consider these additional methods of decreasing the annual costs of higher education:


Credit transfer


A student could attend a two-year college or less expensive four-year college for his or her first year, earn transferable credits and transfer those to a preferred school of choice.


Degree in three


Many colleges offer a program where the student takes on additional courses each semester, allowing students to accumulate the required number of credits to graduate after only three years. This saves both time and money.




Thousands of scholarships are made available every year by private corporations, organizations, foundations, and individuals. Each scholarship will have its own application process, and many are limited to specific students (for example by geography, demographics, or ability). Many websites give you online access to these scholarships, making them easy to find and apply for.


Other expenses


Other expense-cutting measures could include off-campus living, limited meal plans, and used textbooks or supplies. This is where people can benefit from getting practical – and creative.


1 College Board, 2019 Annual Survey of Colleges.

2 College Board, 2019 Annual Survey of Colleges, NCES, IPEDS data.

4 Source:, Publication 970.

5 Access to cash values through borrowing or partial surrenders will reduce the policy’s cash value and death benefit, increase the chance the policy will lapse, and may result in a tax liability if the policy terminates before the death of the insured.

6 Source:


The information provided here is not written or intended as specific tax or legal advice. MML Investors Services, LLC, its subsidiaries, employees, and representatives are not authorized to give tax or legal advice. Individuals are encouraged to seek advice from their own tax or legal counsel.


Let us show you ways to make saving for college a rewarding part of your financial strategy.


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