With college tuition prices rising every year, many parents are finding it difficult if not impossible to fund their children’s education as they had originally planned. It can be particularly hard for those who started saving late in the game. If you find yourself in this position, don’t throw in the towel just yet. Here are some things you can do to help your child get through college.
1) Choose the Cheaper School
The first thing to do is decide what’s realistic for your family when it comes to paying for higher education. Discuss whether going to a more expensive school is really worth it in terms of the education your child will receive and the financial burden that will come with it. Once you narrow down your choices of schools, you’ll have a better idea about how much money you’ll need.
The average price of college tuition is now around $20,000-$40,000 per year, depending on the type of institution; attending an in-state public college is significantly cheaper than a private or out-of-state school. Look to your state schools first for the most affordable tuition. Going to a community college for a year or two for core classes before transferring to a four-year college is another way to save money.
2) Help Your Child Apply for Grants and Scholarships
Not every student can hope for a full-ride scholarship, but nearly all students are eligible for smaller scholarships and grants. You can find scholarships based on academic merit, artistic achievement, athletic ability, or cultural or ethnic backgrounds. Start your search with Peterson’s or Scholarships.com. They take time to apply to, but they can add up and significantly reduce the final bill.
3) Save for College in Tax-Free Plans
You’ve probably heard of “529” plans for college tuition, otherwise known as “qualified tuition programs.” The benefit of 529s is that earnings are not subject to tax (except in a few states) if used on higher education. Funding college from a Roth IRA is another option. Like 529s, withdrawals to pay for higher education are not taxed, no matter what age you are upon withdrawal. One advantage of a Roth IRA is that the money is not counted against your child when it comes to figuring out financial aid. A 529 is.
Both plans are designed to have time to grow, and, like other investment plans, their growth depends on the health of the stock market. That makes them a poor choice for the older parent who is looking to open a savings plan for college. But if you already have a Roth IRA, you might consider using some funds from that.
4) Take Out a Loan
Whether to take out a loan in your own name to pay for college is a difficult question. If you do want to take one out, check out Parent PLUS Loans, federal loans that charge lower interest (currently 7.9 percent) than private loans do. There’s no limit on the amount you can borrow, meaning you can fund your child’s education entirely, but watch out–you may find yourself in deep debt by the time your child graduates. Like student loans, they cannot be discharged even in the case of bankruptcy, except in extreme circumstances. Unlike student loans, you cannot defer repayment.
5) Or Don’t Pay At All
Your child may decide without your help that he or she doesn’t see the value in college or doesn’t want to go. There’s also evidence that paying for your children’s education negatively affects their performance in school, as reported by Forbes in January. Knowing this, you may insist your child get a part-time job during school to help pay the bill, or give money only for things like books and school supplies.
Ultimately, this is not just a decision about what’s best for your child, but what’s best for your whole family. Remember that, as an older parent, you have fewer income-earning years left to repay loans or save for your own retirement. You may want to talk to a financial planner to determine what’s best. Weigh all the options and make the choices that keep you financially healthy.
