Tips to Adapt Your Education Planning in The Pandemic Era
In an interview to Forbes Magazine, Dave Ressner, a wealth advisor and education planning specialist revealed that in a survey taken in March 2020, 36% of college presidents were convinced that this academic year was going to be ‘disrupted in some way.’ The world has taken a very different route in the last couple of months due to the global pandemic. Most sectors and industries have had to adopt new ways and methods to operate. The education sector is no different. Right from virtual graduation ceremonies, and empty dorm rooms to online classes, students and colleges have seen many changes in their daily routines. These changes have also brought about a need to relook at the way parents plan for their children’s’ higher education expenses or on how the students plan to use these funds in the coming years.
Here are some areas that require individuals to adapt to newer education planning tips in the pandemic era:
1. Studying Abroad
Studying abroad can come with its fair share of added expenses. The travelling costs, the difference in currencies, and cost of living, etc. can greatly differ in another country. Given the current circumstances, opting for a school outside the country can be a difficult option. Most countries have stopped admissions for foreign students in 2020. It is hard to say if things will improve next year or when the old normal will return. For parents who had been saving for higher education outside the country, this can be a good opportunity to use the extra funds towards covering education costs within the country.
2. Summer Jobs
Summer jobs have helped many students support and save for their college education. As per a survey conducted by WalletHub, 56% of students reported that their jobs had been affected by the pandemic. Students who were working summer jobs as a way to save for their future education expenses may have to look at other alternatives like sports or academic scholarships, financial aid, etc. It can also help to find virtual summer jobs or to reduce expenditure on other aspects to make up for the loss of income. The same can be followed by college students who were working to support their current education expenses.
3. Housing Expenditure
With online classes becoming the new normal, the need for housing has been greatly reduced. Both on and off-campus residence accounts for a major part of college expenses. However, this can now be eliminated because of virtual classrooms. Students applying to college in the next session can also look for schools that are close to their homes. This way, even when colleges resume physical classes, they can commute from home and still save a considerable amount of money that would have otherwise been spent on housing.
4. Financial Aid (FAFSA)
Free Applications for Federal Student Aid has helped many students to pursue their educational dreams. Generally, the forms for FAFSA ask students to mention the tax information of their families for the previous two years. However, the pandemic has negatively impacted many households, and the statistics for many taxpayers have drastically changed in 2020. The good news for students and parents here is that FAFSA allows students to apply for more aid as per their changing needs. This implies that if a student’s financial standing alters during a semester, they can appeal for more funds.
An important point to note here is that, since a lot of families have been affected by the pandemic, the applications for financial aid have also risen and are expected to rise more in the future. As a result, families who plan their needs in advance and apply for aid well in time may be able to benefit more.
5. CARES Act
The Coronavirus Aid, Relief, and Economic Security Act was passed by the government in March 2020 as a way to support people and businesses who have financially suffered in the pandemic. The Act also contains some provisions for students. College students who have used federal student loans or those who are currently thinking of applying for such loans can expect some relief. For the time being, there will be no involuntary collections on student loan defaults and loan payments have been suspended till September 30, 2020. There will also be no interest added to the student loan during this period, and the loan applicant’s credit score will not be affected by the defaults (if any). For those who have inadequate savings and plan to resort to a loan, this Act can prove beneficial.
6. IRA and 529 Plans
Individual Retirement Accounts and 529 Plans are a preferred financial tool for education planning. Although the falling markets have worried many parents about the lower than expected 529 returns, the data from Morningstar is a pleasant revelation. As per research carried out by Morningstar, based on the returns from 529 plans in the last nine years up to December 2019, investors will be able to recover their losses without any hassles. So, there is no reason for parents to turn their attention to their IRAs as a means to pay for their children’s higher education. Experts too suggest that IRA savings should be reserved for retirement expenses to avoid any hardships in old age.
To Sum it Up
With increasing unemployment, the need for education savings has taken a back seat in many families. However, proper planning can help students and parents’ tide through without taking a gap year. As a result of the changing times, students may have to make certain modifications in their plans. But as Covid-19 is a collective problem, both the government and the universities are sensitive to the plight of students and are offering help in many ways.
For personalized education planning assistance, you can reach out to financial advisors.