How To Finance Child’s College Education

See The Situation With Loans And Credits

This one changes even more frequently, and depending on your residency, it can be real trouble. In the USA, the students loan situation will definitely be different within 3 years and possibly might get canceled at all as it has created a lot of economic havoc over these years. From this perspective, diving a bit into student loans and state financing/support will be a nice thing to do for the parents, who are sure they wont be able to cover all the educational expenses they will need.

Private Loan Repayment Options

Lenders will vary on the repayment options they offer while you’re child is enrolled in school. Some will require that payments begin immediately. But others are more flexible with their in-school payment options.

It’s not unusual today to find private lenders offering interest-only payments, fixed $25 payments, or even full deferment until a few months after your child graduates. But keep in mind that even if you’re able to defer payments while you’re child is pursuing their degree, interest will continue to accrue each month on your principal balance.

Some institutions offer shorter or longer repayment periods in addition to the standard 10-year term, Extending your payment plan is likely to reduce your monthly payment amount, but it will typically also lead to higher overall interest costs.

Though its not something any parent wants to think about, PLUS loans are discharged if your child dies. Thats not standard for private loans, but many do offer it as a benefit.

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Ultimately, the question isnt,Should I take out Direct PLUS Loans or private loans? Its really, Should I take out loans to pay for my childs college education at all? For many financial experts , the answer is a resounding, No!

The most obvious reason to avoid taking out loans for your childs education is the cost. But just looking at the dollar amounts alone isnt enough. It’s also important to consider that the repayment term for these loans will often overlap with your last decade of retirement contributions. If these loan payments cut into those savings or worse, come out of your retirement benefits they can significantly impact your own long-term financial stability.

Direct PLUS Loans come with very little debt counseling and does not take into account how much money its reasonable for someone to take on with their debt and credit rating. With no caps on borrowing beyond the schools stated cost, this means that parents can end up taking on far more debt than they can handle at a time in their lives when many should be avoiding debt.

Finally, it’s important to remember that while your child may be eligible for loan forgiveness if they go into public service or teaching, that forgiveness does not extend to loans you took out on their behalf.

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How Will Paying For Your Child’s College Impact Your Retirement

Though there are loans for college, there aren’t any for retirement. Before you put money into your child’s college education, review your own financial security and goals.

Are you setting aside enough money each month in a retirement plan? If so, and helping your child won’t require raiding your retirement plan, then there’s a greater chance that putting money toward their college education is within your means.

Don’t forget to consider other financial goals you have. Remember that having a Parent PLUS loan or private loan is debt in your name. You’re responsible for it, and it impacts your debt-to-income ratio and your ability to get other loans, including a mortgage. Take a step back and consider whether paying for your child’s college could cause bigger financial problems for you down the road.

Compare Your Financial Aid And Loan Options

If youre taking out a loan, be sure to read the fine print. Each college or university will offer a host of financial aid packages, so research each carefully to make sure youre signing onto the right one. These options also allow you to borrow directly from the government.

• Use the Consumer Financial Protection Bureaus Know Before You Owe tool to create a personal financial aid spreadsheet to compare which loans and aid your student qualifies for.
• Direct Stafford Loans are low-interest and available to both undergraduate and graduate students.
• PLUS Loans are also available for both undergraduate and graduate students.

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Look For Corporate Benefits

Many large corporations have an education reimbursement program for employees who qualify. This can be an excellent way for a student to get plenty of their college costs paid for. Those seeking graduate degrees might consider a job change to a corporation with such a program before enrolling in graduate school.

How To Pay For College

College financial aid offices help students determine how they will pay for school. Because schools expect students to need financial help to pay for college, most schools offer free financial counseling services for current and prospective students.

• 84% of students receive some form of financial aid.
• Scholarships and grants cover $7,500 of annual academic costs per student.
• For federal and state government aid, the average award per student is $13,100.
• Students who attend nonprofit private schools receive the most federal and state government aid.
• Parental support accounts for the greatest financial contribution to most students educations.
• Parental income and savings, parental borrowing, and college savings accounts cover over half of students educational expenses.
• Excluding college savings plans, $11,900 is roughly how much parents pay for one academic year of their childrens education.
• Long-term, high-yield savings accounts and property mortgages are common strategies parents use to pay for college education.

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Consider The Cost Of Living

Keep in mind that housing and other living costs will vary by location. If you choose to live off-campus, your living expenses are typically much less. Geographically, an apartment in New York City will be much pricier than an apartment in the Midwest, and the college where you obtain your undergraduate degree can sometimes influence where you will end up working and living after school.

Therefore, consider where you want to live after graduating and the cost of living in that location. If possible, it should be a place where you would like to live, the cost of living is affordable, and where your school will be a recognizable name that will allow you to get more mileage from your diploma. Various branches of the University of California may be considered terrific schools in the West, but may not be held in the same high regard in New York.

Going The Grant Route

Grants look a lot like scholarships, but they tend to serve different purposes. You’re much more likely to receive a grant if you have demonstrated financial need, and those who have financial resources to help them pay for college will find it more difficult to meet the qualifications to get grants to help them with their educational expenses.

Grants often come either directly from schools or from federal or state government programs. In some cases, grants are targeted to students who fall into specified groups, such as low-income households and minorities, while others are more general in their application.

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Explore Your Employee Benefits

For working families, pay a visit to your Human Resource Department or get familiarised with your Employee Handbook. Did you know companies do much to reward their employees and may have indeed conjured employment contracts that are peppered with staff benefits which are often overlooked and not fully explored. Now like never before, as your child prepare for higher education, discover how your current employment benefits can be unleashed to financially aid the family. There are occurrences where companies do issue cash rewards for every A clinched or full scholarships by the companys foundation arm and lastly an event-based reward in the forms of Scholarships2u.com Scholarship Benchmark Tests or leadership camps where children of employees are eligible to participate for free. At these camps, your child is either offered a chance to instill self-awareness, life skills or be awarded a participation certificate which can be beneficial as they move to stand out from other competing scholarship applicants.

Take Advantage Of Educational Tax Benefits

There are several education tax benefits that can be claimed when you file your federal income tax returns. These include the American Opportunity Tax Credit and the Lifetime Learning Tax Credit , which are based on amounts paid for college expenses. Theres also the Student Loan Interest Deduction, which provides an above-the-line exclusion from income for up to $2,500 in interest paid on federal and private student loans.

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Dont Forget About Retirement

For many parents, their children will be heading to college as theyre heading towards retirement age. This presents quite a few problems for parents who didnt create a retirement fund. Their choices consist of continue working throughout the college years, which may not be entirely feasible especially if you have more than one child, or trying to make it work with social security payments.

Its a good recommendation to have your retirement fund set up before you save for anything else, just to make sure your whole family is well taken care of when youre older.

Direct Plus Loan Repayment Options

Repayment is another area where federal parent loans differ from student loans. Your child doesnt have to start paying back their federal loans until theyre out of school, but Direct PLUS Loans go into immediate repayment.

You can request a deferment as part of the application process, though, which means you wont have to start repaying the loans until six months after your child stops attending school at least half-time. This applies whether they graduate, drop out, or drop below the attendance requirement.

Direct PLUS Loans are not subsidized. So theyll accrue interest while theyre deferred. You should consider this when assessing the long-term costs of taking out these loans. At a minimum, its probably a good idea to start making interest-only payments right away so that interest doesnt accrue while your child is still in school.

Student loans have a variety of repayment plans, but the options for Direct PLUS Loans are more limited. The Standard repayment term for Direct PLUS Loans is 10 years of equal monthly payments. You can also choose the Graduated plan, in which the repayment term is 10 years but the payments start out lower and increase over time. There is also the Extended plan which allows up to 25 years for repayment, if you qualify, but obviously adds greatly to the interest youll pay in the end.

Read this article about the options for repaying your Direct Parent PLUS Loans.

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Choose The Best College Savings Option For You

First, its important to choose the investment vehicle that meets your needs. There are several fund types to choose from, all with their own rules and tax consequences. You can even have more than one account, depending on how your finances change over time. Below are some college saving products to consider:

Submit Your Apps And Take A Break

Take a break, relax, and most importantly, be patient! Remember, you put in the work and gave it your all. Now the only thing left to do is wait. Good luck you got this!

Between teachers, academic advisors, parents/guardians, and even your peers, there are plenty of people you can rely on to push through the college application process.

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Study The Grant And Scholarship Options

For those who are successful at studying, there are many grants and scholarships that might cover a good chunk of the whole tuition cost. Keeping an eye on the grants for subjects that your child is extremely good at, might get you a significant help when selected. Some scholarships can cover the whole tuition cost or a part of it, and either option, to be honest, is better than paying it all on your own.

Tip: cultivate the competitiveness trait in your childs character and encourage him/her to participate in the school projects, state competitions, etc. In this way, they will be more eager to try the scholarship race, too. If youre in Armed Services, you can check out educational support offered by colleges and universities.

Programs exist to offer assistance to former and active military personnel and their families. You can take advantage of these programs to pursue your academic and career goals, and help with your childrens education. Learn more information about military and veteran student services programs at .

If Youre Caught Short

If you have insufficient savings for your childs education when he or sheis close to entering college, there are ways to generateadditional funds both now and when your child is about to enter school:

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Explore Financial Aid Options

Once you choose a college, its time to figure out how youll pay for it. Tuition can be expensive . Then theres room, board, books, supplies, and more out of pocket costs. Fortunately, there are myriad opportunities to help pay for college, from federal financial aid to college scholarships.

However, the options can get really confusing really quickly. The easiest way to start is by filling out a FAFSA and CSS . The FAFSA and CSS help determine your eligibility for federal financial aid and non-Federal college scholarships, respectively. Simply visit the FAFSA and CSS websites and follow the instructions.

Whatever your situation, you should always explore opportunities for financial aid. Otherwise, you may be leaving money on the table!

Students should start getting their application items together in the second half of their junior year. Be sure to have basic information , recommendations from teachers, financial aid forms, and SAT/ACT scores.

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What I Learned Putting Three Kids Through College

Now that my youngest has graduated, Ive experienced putting three kids through college, and each was a completely different experience.

Without going into specifics, here are the lessons we learned:

• Your kid can do a lot to help control college costs:
• Pick a good school in your states university system

• Do well in high school to win merit-based scholarships

• Take Advanced Placement classes and get good grades on AP tests

• Attend community-college classes while in high school for relatively inexpensive credits

• Graduate in four years

Refinance Your Home Loans

Over the years, your diligence in paying off your loans can indeed be refinanced to meet your childs education needs. Tap onto the latest government incentives and economic stimulus by working closely with your preferred banking partner to relook at the current home loan interest rates. Free up the accumulated finances you have previously repaid to the bank and ride on the latest home loan interest rates whilst helping your child go further.

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