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Tuition costs have soared past other household expenses, increasing 900% over the past few decades, and saving for college has become more important than ever. According to JP Morgan, families now pay 48% of higher education expenses through their income and investments, up from 38% just 10 years ago. Here with more on how households should think about saving for education, we've got Trisha Scarlatto, who is the head of education savings at JP Morgan. Very important topic. You've got, of course, some who are finally getting to the stage to the podium and they're going to hear that commencement speech and they're going to be done. And then you have others whose families are going to say, okay, all right, how are we going to prep you for the next four or maybe five years? So, as we think about the cost of college planning, just to start off, what are the considerations that families need to be keeping in mind?

I think just that, know the cost. A lot, I mean, we see in the news, or we hear people talk about how expensive college is. Understand what it really is. So, so knowing that, you know, public in-state tuition is around $25,000. Public out of state is about double, so it's about 50. And private is close, you know, there's some institutions that are almost $100,000 now. So know those costs, but then know your net cost. So understand what you might get in financial aid, which is never as much as we'd like it to be. But understand what you may get. Um, and that helps you know your number.

Certainly, start there. What is the calculation that families, that households, that students should also be running on the return that they're going to get for the money spent to get that degree?

Look, there's always going to be the argument that it's so expensive, is it worth it? The the numbers say that it is. So the numbers say the difference between a high school and a college degree is about $40,000 a year. That's a lot of money. So if you think you're earning $40,000 more in a year, that pays for almost two years of in-state public tuition. So look, kids these days, you know, Brad, we know, they have the sky's the limit. There are so many options. The nice thing about a 529 plan is it doesn't have to only be used for two and four year institutions. You know, now includes apprenticeships, vocational schools. So like the world, 529 plans have become more flexible as well.

What are the two different types of 529 plans that people should know about and what's the core differences that we see between them?

So, I think you're what you're asking is the advisor sold versus direct sold. So you have the ability as, um, you know, a parent or anyone for that matter to go into an account directly. So you can go online, go to your state's plan, and you can invest directly in that plan. You also have the ability to go with an advisor. So some folks want that guidance, want the help of an advisor. So you certainly could seek that out. Plans are different. I would say advisor guided plans have probably more options. They're more active managed managed plans. Um, where you'll see the direct sold plans typically less options and more index type of investments. Um, but very similar in the structure. Um, but you always look at those underlying investments.

And then when it comes to financial aid, once you've had to apply for it, once you do the assessment and run the kind of calculus around exactly how much you still need to get covered, how much does financial aid actually cover in that kind of reality check that many go through?

Not not a lot, not as much as you would hope. So obviously, it's going to be different for every family. But to give you an example, the average family last year got about $12,000 between grants and scholarships. Now, remember, grants are always going to be need-based. So if your income is higher, you're not going to get those grants. Where the most dollars are are the scholarship and merit money. So that's why I always push people, we want our kids to do well in school, but that's where the most dollars are. On average, you may see about maybe 20% of the cost, um, could be covered by aid. And remember, not all aid, when you get that package, it's not all free. They're always going to put in all those loans. So look at that package or look at that, you know, acceptance letter that you get from the institution, look at it closely because I bet you a lot of it is is loans and not true aid.

What is the good new rule of thumb for how quickly you should be able to pay off what you've aggregated in expenses over the course of college, as we know that most people have to take out a loan of some sort or another. Paying down that loan though then becomes a challenge after you graduate.

Certainly. I mean, you want to try to get it down as quickly as possible. Most are 10 years, um, some go out further. Um, I would say, you know, look, people that have student loans, they're putting aside other goals because they're trying to pay that off first. So but the reality is is last year, 41% of families took out loans. The average family last year graduated from college with $55,000 between parents and students. So the reality is is people typically need to get that help. Um, I would say if it's if it's a loan that can be refinanced, certainly look at that if interest rates continue to come down, certainly look to see if there's an opportunity to refinance.

Trisha, thanks so much for taking the time here with us in studio.

Always a pleasure.

Likewise.