Education Needs Analysis: Definition & Methods

Instructor: Ian Lord

Ian has an MBA and is a real estate investor, former health professions educator, and Air Force veteran.

In this lesson, we will review how Certified Financial Planners conduct an education needs analysis for a client by comparing the cost of attending a desired program with their ability to save, as well as explore options if the first plan fails.

Education Needs Analysis

Charlie is a Certified Financial Planner (CFP), who often works with clients trying to determine how will they pay for their own or their children's education needs. Education can be a significant financial burden, but with effective planning, a person can enter an education and training field that meets the need for a goal in a cost effective manner. Charlie uses an education needs analysis to help his clients determine the cost of their educational goals and plan for saving options given the desires and finances involved.

Choice of Education Program

An education needs analysis serves two purposes; figure out the cost of the client's education goals and evaluate the client's ability to pay for that goal. When Charlie counsels a client who wants to plan for college, the first step is to get an idea of what kind of outcome the client desires. Do they want to be a welder or a doctor? Either can be very lucrative, but there are very different ways to get there in a financially conservative manner. Community college may be an effective choice to learn a skilled trade such as welding and get started working. A high school student wanting to become a doctor will not only need to budget for an undergraduate degree but also the additional years of medical school.

Once the desired outcome is clear, where will the client or their children get the education and training? From a cost perspective, the client has two choices to make. The first is to attend a public or a private institution. The next is to attend an in-state or out-of-state school. Generally, a private school will be more expensive to attend compared to a public school. An out-of-state school will also probably charge more for tuition, plus the distance involved tends to eliminate options such as living at home or makes it more expensive to come home for visits.

Funding Calculations and Assessment

Having the funds available when it comes time to pay for the desired education program reduces the anxiety and trouble of taking out student loans to pay for school. Once the client knows where they want to go, Charlie can help them find the total cost of attendance. This information can be found directly from the financial aid offices at higher education institutions since the reported amounts are used to determine student loan funding amounts. Aside from tuition, costs of attendance also include books, additional mandatory school fees, housing, transportation, and meals.

As a CFP, a large part of Charlie's role is to help the client evaluate the ability to meet education goals. Many families don't have the resources to attend any school a student desires. If the client wishes to pay in full without taking student loans, a cheaper option such as a community college followed by a transfer to a four-year school to finish might be an option. Charlie can look at the projections and help identify how feasible a plan might be. Maybe the student can attend the more expensive program if he works while in school; if so, how much does the student have to make and is that a reasonable expectation with the school workload?

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