Written by: Kristen Jowers, M.S., and Nichole Huff, Ph.D, CFLE
A college degree is a milestone achievement and financial goal for many military families. It represents an investment in time and money that can shape career prospects and future life trajectories. Like other large purchases, education planning requires as much financial planning as it does career exploration. Whether you are supporting a service member transitioning to civilian employment, supporting a military spouse, or helping both as they explore options for their child(ren), below are four ways for military families to pay for education expenses.
- Save money over time (e.g., 529 plan).
- Acquire money (e.g., scholarships, grants).
- Borrow money (e.g., student loans).
- “Pay as you go” from parents’ or student’s current income.
When considering various strategies for paying for college, knowing how much it costs to attend is helpful. According to the Education Data Initiative, the average cost of attendance is around $38,270 per student per year, including tuition, books, supplies, and daily living expenses. If the student plans to attend an out-of-state school, private school, or take online classes while living at home, that could move the cost up or down.
Save Money
The first strategy for paying education expenses is saving money over time and earmarking it for education expenses. A popular choice is the 529 plan, a college savings account that can be created as early as when someone is born, and can be contributed to over the years between birth and college. 529 plans can be used to pay for a variety of things including K-12 education expenses, college or technical school, graduate school, books, and technology purchases like a computer, or even an internet bill if used for educational purposes. There are no time or age limits for when the money deposited into a 529 plan must be used. An added flexibility is that plan beneficiaries can be changed if needed. This is particularly helpful if one child decides not to go to college or receives a scholarship. To better understand the qualifying expenses covered and tax implications of 529 plans, check out the OneOp webinar, Maximizing the Use of 529 Plans for Military Families to learn more.
Acquire Money
Military families can acquire money, including scholarships and grants to pay for education expenses. Encourage prospective students, including dependent children to apply for scholarships for military-connected youth. More scholarship information is detailed in the Office of Financial Readiness blog post, College Funding Designed for Military Children.
Service providers can also help military families determine if the student may be eligible to receive benefits from the Post-9/11 GI Bill (chapter 33), which can provide additional cost savings to service members and eligible dependents. Active-duty service members can transfer up to 36 months of Post-9/11 GI Bill benefits to their children. Compare eligible programs with the GI Bill Comparison Tool, and filter results based on location, name, or community-focused filters. Military families may also be encouraged to compare the cost of attendance, length of time to degree completion, and starting salaries for desired careers to determine how much is needed and if any gaps must be alternatively filled.
Borrow Money
If student loans are needed to bridge the affordability gap, financial professionals can help military families apply for financial aid through the new Free Application for Federal Student Aid (FAFSA). Borrowers need to be mindful not to borrow more money than is needed and that can be repaid over a reasonable timeframe. Encourage service members to create a spending plan that includes education expenses and student debt repayments.
For service members who have already taken out loans to pay for educational expenses, the Servicemember Civil Relief Act caps interest rates at 6% during periods of active duty, and 0% interest for members serving in a hostile area that qualifies for special pay. If you are working with a family who is already in repayment on their student loans, you can help them navigate their options by watching this on-demand webinar, Federal Student Aid: Repayment 101 to become more informed about Public Service Loan Forgiveness, Income-Driven Repayment Plans, and the Fresh Start Program.
Pay As You Go
With a plethora of education-savings benefits available to military families, some may opt to combine student and/or parental income to cash-flow additional expenses such as textbooks or student fees. Students can subsidize the cost of attendance by working on campus and/or finding ways to stretch dollars while enrolled. Several ideas include renting textbooks, having roommates, and utilizing campus facilities like the dining hall, gymnasium, and on-campus recreation and entertainment to save money in other areas.
Many scholars must combine these four strategies to make affording college more attainable. Encourage military families to maximize their financial resources with a balanced approach that includes long-term savings, borrowing responsibly, earning additional income, and paying for additional expenses as they arise.
Resources
Office of Financial Readiness. (n.d.) 529 Education Savings Plans: The Basics for Service Members. https://finred.usalearning.gov/assets/downloads/FINRED-529Plans-FS.pdf
Office of Financial Readiness. (n.d.) Maximize Your Education Benefits. https://finred.usalearning.gov/Benefits/TapResourcesPayEducation
Federal Student Aid. (n.d). Aid for Military Families. https://studentaid.gov/understand-aid/types/military
Jowers, K. (August 2024). Maximizing College Savings. MONEYWI$E. UK Cooperative Extension Service. https://fcs-hes.ca.uky.edu/files/moneywise_august_2024.pdf
Jowers, K. (2024). Smart savings: College savings month [podcast]. Talking FACS. University of Kentucky Family and Consumer Sciences Extension. https://ukfcsext.podbean.com/e/smart-savings-navigating-college-costs/
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