Whether your child is 3, 13 or getting close to high school graduation, you may be worried about how you are going to help them pay for their college education.
It’s never too early or too late to address this high cost of education, and the tips below can help you prepare for this big expense.
Savings Plans
No matter how young your child is, you can start a 529 savings plan and name them as the beneficiary, meaning that the money in it will go to them.
This money can stay there without being taxed and will not be taxed on withdrawal as long as it is put toward qualified educational expenses.
State regulations regarding 529 plans vary, so find out what the rules are in your state.
Another option is taking distributions from your retirement plan to put toward the education.
There are advantages and disadvantages to using a 529 or retirement plan to help pay for college that vary according to your particular situation, so you may want to consult a financial professional to discuss your options and the best course of action.
Federal Loans
In the year before your child attends college, you should help them fill out the Free Application for Federal Student Aid.
This should be done as soon as possible after the form is available for the following year since some aid is offered on the basis of first-come first-serve.
Filling this out will help you determine how much they are eligible for in student loans, grants, and any other federal assistance.
Private Loans
Federal aid is often not enough to cover all the costs of college, or your child may not qualify, so you can also look at private student loans.
There are many different loans available, but the problem students often run into is that they do not have a credit history.
By becoming a student loan cosigner, you can greatly expand the options that they have to borrow money for college.
Be sure to do your research to help find the lender with the best terms and interest rate for your budget.
Work and Savings
Your child can also work and put some of their own money toward college, both from jobs that they work during high school and jobs they have in college.
Even some parents who are able to pay the full amount for college prefer to have their children contribute some money in this way.
The job should not be a distraction from school, but parents often feel that these contributions help their children value their education more.
They may be more invested in and feel more agency toward a degree that they helped pay for.
Scholarships and Grants
The government, schools, nonprofits and private organizations all offer various types of scholarships.
These grants or scholarships can range from a few hundred dollars to paying for a child’s entire education, so it is worth doing some research and having your child pursue the ones that they are eligible for.
