Benjamin Franklin said the only two things that are certain are death and taxes. It's a safe bet that you can add "college costs will continue to rise" to that list. Parents who are looking down the road at college costs for their children may be overwhelmed. How can you afford $15,000 to $40,000 per year for four years when you're struggling to make the mortgage payment each month? And that's just the cost of one child - what if you have two or more?
Here are twelve tips that might help you figure out how to pay for your child's education:
- Consider a 529 plan: If you have the luxury of planning ahead, start saving when your children are young and put away a bit each month. Small investments can really add up when the money has several years to grow. Saving $100 per month for 18 years (a total investment of $21,600) will yield $48,000 if invested at 8 percent. Even with a modest 5 percent rate of return, the money will grow to $35,000. And since you won't draw out the entire balance during freshman year, the money that remains in the account will continue to grow while the child is in college.
- Scholarship money: There is a lot of scholarship money available if you know where to look. There are essay contests and other competitions available on the Internet and you'll hear about a lot of them as your child approaches college age. You might think that contests available on the Internet are open to so many hundreds of thousands of children that the odds of winning one of these scholarships are small. Think again. Many online scholarship offers report that only a few hundred students actually apply. Your school will have information available about which scholarship competitions are good matches for your child.
One of the best ways to find scholarship money is to start early. Explore scholarship opportunities in your community when your child is very young, then help your child position himself or herself for consideration for one of these scholarships. Organizations that many children are likely to join anyway, such as 4-H and scouting, either offer scholarships or help position children for scholarship opportunities. Community groups such as theatre organizations, garden clubs, political organizations, and so on often have scholarship money available.
Many businesses offer scholarships to the children of their employees. And many colleges offer scholarships to children of alumni if the children go to the same college their parents attended.
Many colleges offer not only need-based scholarship and grant money but merit scholarships as well. Once you figure out where your child is going to attend, look into the scholarship options at that school, and then help your child figure out how to get in a position to earn the scholarships.
The important thing to remember about scholarships is to explore early and find out the requirements, then help your child do what is necessary to get in a position to earn the scholarship.
- Work-study: Most if not all colleges offer some sort of work-study program for their students. Jobs are available throughout the campus, in offices, sports facilities, cafeterias, dormitories, and so on. Check with the school when you enroll regarding work opportunities on campus. Students officially enrolled in the work-study program get first priority for campus jobs. Work-study is typically included as part of the complete financial aid package.
- RA: Colleges with dormitories often have Resident Assistant positions available to students, starting in the sophomore year. RAs help with the personal and academic issues that arise among students on the floor for which the RA is responsible. The RA is often a facilitator when disagreements arise, and provides assistance to floor residents who have questions about campus life. In return, the RA might receive free or reduced-cost housing, or other compensation such as a free or reduced meal plan.
- Year at home/online/community college: If the cost of four years away at college is simply out of reach, consider having the student attend a college close to home and live a year or two at home, or stay home a year and take online courses. Community or junior colleges provide another option. Many students will take a year or two at the local college and then transfer to a four-year school.
- Summer job: It's not unreasonable to expect your child to work during the summers of college years and contribute to the college cost. Set a reasonable goal, such as expecting the child to earn enough to purchase text books and pay for spending money, or expecting the child to pay for room and board while you pay for tuition. Alternatively, consider requiring your child to bank the money earned during college summers so that he or she will have a bank account to help with housing and other costs when college is over.
- Ask for money gifts: Relatives are great sources when it comes to saving for college. Set up a college saving account and give relatives the account number, then ask them to make deposits at birthdays and other holidays in lieu of tangible presents. Relatives can establish 529 savings plans and Coverdell IRAs for your child as well.
- Put other expenses on hold: Sometimes sacrifices have to be made. Weigh the importance of college costs compared to your other spending and decide where you want your money to go. During the college years you might not be able to take vacations or replace cars and furniture. If you understand this in advance, the tight financial situation you might find yourself in during those years will be easier to cope with.
- Get another job: Many stay-at-home parents rejoin the workforce when their children go to college. Other parents take on a second, part-time job and use that money for college costs. In today's work-at-home society, taking a new job doesn't necessarily have to mean disrupting the lifestyle, although you might find yourself wishing you had more hours in the day.
- Consider part-time school: There's no shame in attending college part-time and taking more than four years to finish. Taking a lighter course load frees the student up to work to help pay for college. Another alternative is for the student to take a year off, either right after high school or sometime during the college years, save money, and then return to finish college.
- Get an employer to pay: There are plenty of employers who will reimburse employees for college costs. Often this means working full time and taking one or two courses at a time, but that doesn't mean it can't be done. Some employers will require a post-college work commitment for a certain number of years if they help foot the bill for college.
Check with your own employer. Many employers offer scholarship money to children of employees.
- Use tax benefits to your advantage: The tax benefits available in the form of college tax credits and deductions are designed to lower the cost of college. Talk with a tax advisor to make sure you're getting the most benefit from the options available to you.
Start today! Look at the costs of the colleges that interest your child and determine the best plan for your budget.