As fast as children grow, so does the cost to educate them which has more than tripled in the past 20 years. Whether you have 18 years to prepare or your son or daughter is packing right now, you’ll have to decide how to foot the bill. If you plan on paying for all or part of your child's college education, you’ll need to develop a savings plan as early as possible.
The most common way to finance an education is with student loans. While most student loans do offer attractive repayment options, many students are dismayed when they are still paying for their education 5, 10, or even 20 years after graduation. If this is a situation you and your college-bound child would like to avoid, there is good news: opportunities for funding your child’s education are diverse as the career paths they afford.
There are thousands of private scholarships awarded every year that fall outside of the university’s domain. Private scholarships are not limited to students with perfect grades and packed resumes. Artistic talent, creative writing skills, lineage, interest in a particular field of study or being a member of an underrepresented group can all help you secure a private scholarship. However deadlines can be as early as July, more than a full-year before the student plans to enter college, so scout out and apply for scholarships early.
Section 529 plans
Section 529 plans are state-sponsored college savings programs. The two major types are Prepaid Tuition Plans, which lock in current tuition rates, and State College Savings Plans, which offer more flexible investing options. Both are useful ways for families to save for their children's college education. If you are planning to use a 529 plan, dedicate a specific dollar amount per month to add to the account. Funds in a 529 plan are taxed at the student’s tax rate, and can be transferred to another individual if they aren’t needed.
College controlled aid
Your individual college may be able to offer a short-term installment plan that splits your tuition into equal monthly payments. Many schools also offer their own merit scholarships.
The U.S. Armed Forces offer several programs to provide students with money for school. The most well know is the Montgomery G.I. Bill that provides cash education incentives to encourage students to join and serve a tour of duty.
Finally, don’t forget to enlist the student’s help. Money earned from a part-time job, including work/study jobs can cover incidentals, such as books. Keep an open line of communication with your child as they will not be learning about personal finance at college, but from you.
Need help understanding your student loans? Unsure what programs are available to help you pay back your debt and get your finances in order? MMI now offers student loan counseling. Our trained counselors can help you understand your options and create a plan to get your student loan debt under control. Visit our Student Loan Counseling page for more details.