It’s July and returning to school in the fall may be the last thing many families and students are thinking about. However, planning for the 2024-25 academic year is already well underway for those attending college in the fall, said Ryan Stuart, a human sciences specialist with Iowa State University Extension and Outreach.
Financial aid often is the first item on the agenda, and despite issues with this year’s rollout, the Free Application for Federal Student Aid form is up and running. Students who are interested in receiving federal financial aid, such as Pell Grants and Direct Loans, should complete the FAFSA as soon as possible, said Stuart. Next, interest rates for the Direct Loan program are updated every year, and the 2024-25 rates were established in May.
“Unfortunately, borrowing costs remain relatively high for the upcoming academic year,” Stuart said.
On a positive note for consumers, costs for books and supplies continue to remain stable, and the price growth in tuition has slowed compared to the overall Consumer Price Index.
“This trend may provide some level of relief for families living with higher expenses for several years in a row,” said Stuart.
Families also have the option to plan years in advance for their children’s educational needs. 529 Savings Plans, which are qualified tuition plans, have existed for several decades now, but some of the most significant benefits of these plans were only recently implemented. In addition to qualified tuition and fees, 529 plans can now be used for K-12 education expenses, student loan payments and other qualified educational expenses.
Similar to other tax-advantaged investment accounts, 529 plans may offer access to various underlying investments that could help keep up with inflation over time; however, the student’s time horizon (when they need to use the money) and personal risk tolerance should always be considered. Starting this year, some individuals may be able to roll their unused 529 funds into a Roth IRA.
“This is a major change to the program,” said Stuart. With this option, eligible beneficiaries can potentially avoid taxes and penalties that are typically applied to withdrawals of unused funds.
