How to Help Your College-Bound Kids Pay for College—the Smart Way!
Working toward a college acceptance letter is challenging. So is paying for the subsequent tuition bill. Luckily, there are many options when it comes to saving for college—from special savings accounts to financial aid to scholarships and more. Whether you’re footing the bill, helping out, or having your kids do it all on their own, here are some ways to save and pay for college.
Apply for Financial Aid
Financial Aid is the U.S. federal aid program that helps pay for educational costs like tuition, room and board, books, transportation, and more. There is about $238 billion worth of financial aid to help students go to college and it comes in the form of grants, scholarships, work study programs, and low-interest loans.
Everyone can apply for Financial Aid with a FAFSA application. However, not everyone will get the same aid benefits and some may not qualify at all. It is also first-come, first-served and those who apply early are more likely to get some financial aid money.
Financial Aid is determined by assessing your family’s income and assets from the year prior to your FAFSA application. Then, your family is given an Expected Family Contributiuon amount, or EFC, that is subtracted from the tuition cost. The number left is the aid your child will need to go to school.
If you’d like to estimate your student aid benefit, try the FAFSA4caster.
Apply for Private Scholarships
There are a ton of private scholarships out there—big and small—that can help with college costs. Encourage your college students to apply for any and all applicable scholarships to increase their chance of saving on expenses. While scholarships may sound intimidating, there is a huge variety from $500-$1,000 book scholarships to big full ride scholarships. At the end of the day, some money is better than no money at all. So have your kids search for scholarships in your area and apply!
Look Into Savings Account Options
There are a number of options when it comes to saving for college—whether it be you, the parent, who’s doing it or your child.
- 529 college plans
These savings plans can be started when your child is born and contributed to by family members. They can also be started once college is closer on the horizon. One of the biggest draws of 529 college savings plans is that they have great tax benefits. Similar to a health savings plan where you contribute money and use it tax free on health expenses, 529 plan funds can be used toward education expenses without being taxed. Money spent on other costs will be taxed and penalized 10% on earnings. These plans also belong to the parents. So if your child decides not to go to college, you can always transfer it to another family member or close the account and pay the taxes and fees.There are two major downsides to most 529 plans and it’s their inflexibility to be modified and cost in fees. Policyholders are only allowed to move money around in investments once per year and fund management commissions.
- Prepaid tuition plans
If you purchase tuition for a public university this year, your price will be locked in when your kid goes to college. This only works though if they stay in state and go to a public college. Private universities can cost you extra if you pay for a whole year’s worth of college at a state university, but it’s only worth one semester there.
Pursuing school beyond your high school diploma can open doors. So can opening college savings plans and applying for scholarships. Try some of these options and you’ll give both yourself and child a leg up in the future.
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