As winter has turned to spring, the high school and college seniors are inevitably thinking about graduation, and what comes next. That could mean finding a job, joining the military, or pursuing further education. Along with medical cost, over the last few decades, the cost of higher education has increased significantly.
According to the Pew Research study linked below, a lot of things have risen for current young adults. Comparing 2023 young adults to their counterparts in 1993, today’s young adults are more likely to be college educated, but also more likely to have student loan debt and live with their parents.
Parents, Young Adult Children and the Transition to Adulthood | Pew Research Center
What can parents or grandparents do to help children prepare for adulthood and financial independence? One aspect is to alleviate the need for student loans that can slow down the path to economic independence. That can involve helping students make better choices about the type and cost of the education they pursue, saving more for education, and also making sure students don’t miss out on potential financial aid. For those planning for college tuition now, there is a new wrinkle in terms of updates to the Free Application for Federal Student Aid (FAFSA). There have been plenty of headlines in the news about these changes to FAFSA and the delays it is causing current students. In general, we encourage people to read about the changes, and give themselves extra time to complete the FAFSA as well as compare different financial aid packages from different schools a student may be considering.
https://studentaid.gov/articles/fafsa-changes-coming/
For those of you who have children, grandchildren, or other loved ones who are further out from enrolling in college, the 529 continues to be the main workhorse for accumulating savings for education. Many of you have likely heard us talk about the new option that was created by the SECURE 2.0 Act. One concern that families have had in the past involved a child not using all of their 529 savings, whether it be because they did not end up attending college, or maybe because they received scholarships. The government has helped address some of these concerns by offering a new path to convert some 529 account balances to a ROTH IRA for the student. Of course, there are rules and requirements to follow, but it does add new flexibility.
https://www.journalofaccountancy.com/news/2023/jul/the-new-529-rollover-roth-ira.html
We can’t solve all the financial issues for today’s young adults. We can help them make better decisions, teach them financial literacy at younger ages, make sure they complete the FAFSA to get access to as much financial aid as possible, and we can save more for education when possible. Hopefully, that can lead to more young adults with educations better aligned with their career aspirations, less future young adults with as much student loan debt, and less young adults still relying on their parents for financial support in their 20s or even beyond.
Hopefully the April showers have brought May flowers for you. If you have a graduate in the family this year, congratulations! If you are thinking about your future graduates and want to discuss any of these topics above, we are here to help.
The Wolfe Kobes Group
Jean, Kurt, Anders, Maggie & Molly
VK2024-0507