My daughter is a junior in high school and she is already having to figure out what she wants to do after she graduates from high school. It is hard to believe that she will be walking across the stage in a year and a half. At this time she hasn’t decided where she wants to attend college, she still has a few more months to decide. Depending on the college that she chooses, the cost of tuition, books, room and board are going to vary depending on the school. By the time that my other two kids graduate, college expenses will continue to rise In fact, college rates are increasing at least 6 or 7% each year, which is twice the rate of annual inflation.
Today, I wanted to share 8 ways to save money on your child’s college expenses.
Open a 529 Account – College Fund
Most parents are caught up in the moment of raising their child that saving for college slips their mind until they are in their junior year in high school when they are preparing to make life choices that will affect the rest of their lives. Once they are a junior in high school, parents are scrambling to figure out how they are going to help their child pay for college. If you start saving for college as a newborn, they will have most of their college expenses paid for by the time they walk across the stage. Opening a 529 College Fund, is a great way to save for college expenses. All of the earnings are tax free and there is no penalty for withdrawals for educational purposes.
Apply for Financial Aid
You should always apply for financial aid no matter where your child goes to college. If you skip applying for financial aid, you could miss out on getting money for college. Plus, you don’t know if you qualify for aid unless you apply. Financial aid can cover a portion of your expenses and can lower the amount of out of pocket expenses that you will pay for each semester of college. The amount of financial aid depends on the number of hours that you are registered. If you do receive financial aid, you do have to follow their guidelines in order to continue receiving financial aid. This type of aid is income sensitive and you need to visit the FAFSA website for more details.
Apply for Scholarships
It is never to early to start applying for scholarships. Scholarships take a little bit of work but can be well worth the investment if you put in the time to apply for them. Most students don’t take the time to apply for them because most of them require you to write an essay. At open house a few weeks ago at my daughter’s school, before applying for scholarships that students should take the time and volunteer several hours a month. This helps them gain diversity and teaches students about helping others. Parents urge your teenagers to take the time and apply for scholarships, it is free money that your student can put towards college if they are selected to receive the scholarship.
Have Your College Student Get a Part Time Job While in College
Urge your child to get a part time job to help pay for the cost of college expenses while they are still in school. I realize that college life is your child’s first taste of freedom and most kids will quickly learn that they don’t have someone there to tell them to get up for college, study for their test, or start on their project early. They should have time between their classes and working a part time job to complete their homework. If they are working, your child should put a portion of their money aside to start paying for college or paying back or refinancing their student loans NOW. The sooner they pay off the loans the less debt they will have once they graduate from college..
Cash in Part of Your Retirement Account
Parents you can cash part of your retirement account without any penalties for education expenses. Remember to use this option sparingly because this money has to last you through your retirement years too. Plus, if you do cash out part of your retirement and your child receives financial aid the additional income has to be reported on your next FAFSA application. Talk to your financial adviser before deciding to cash in your retirement account.
Check with your tax professional to see if you qualify for tax deductions or credits that you are entitled to take if you are paying for college expenses. There are two credits called the: Hope Scholarship and Lifetime Learning credits that you can possibly qualify for at tax time. Plus you can claim a deduction for any tuition, fees, or student loan interest that you have paid during the calendar year. This will lower your taxable income and you could possibly be entitled to a tax refund, which you can put towards college expenses.
Student loans should be a last resort to paying for college expenses. I realize that most families don’t have the capital to pay for college expenses upfront and have to take out loans in order to pay for college. However, I highly suggest that you take a look at the tips above and try to reduce the amount of student load debt that you have to take out. Try to take out Federal Student loans because they offer the lowest interest rate and it will reduce the amount of money that you have to pay back. Only borrow the amount of money that you need; instead, of taking the full amount that your school says you have available after your tuition has been paid. You can always send the extra money back to your lender.
Ask Your Grandparents, Relatives, or Family Friend
Did you know that your grandparents can pay for college tuition directly to the college of your choice without imposing a gift tax on the money? They can only pay for tuition. If they end up paying for your room, board, and fees then you are required to pay a gift tax on the money. If you are planning on going this route, please talk to a tax professional. Most of your grandparents are probably secure in their retirement and may be interested in liquidating party of their estate, so talk to your grandparents and see if they are willing to help you with college expenses.
College expenses are rising faster than the rate of inflation. Depend on your child’s college choice, expenses could easily double or triple by the time they are ready for college. I hope that these tips are helpful and that you can use them to help you start saving for college before they are in high school.
Capital One 360 Black Friday Sale
It’s easy to get caught up in the hustle and bustle of the holiday season and lose sight of the goals we’ve set to help us achieve financial peace of mind. This holiday, I wanted to encourage families to stay on track with their finances, Capital One 360 is decking the halls with deals you can bank on, including new account bonuses, referral bonuses and closing cost credits. Be sure to add Capital One 360’s Black Friday Sale to your shopping list. Visit Capital One 360 to give yourself the lasting gift of financial peace of mind by taking advantage of Capital One 360’s deals on banking, brokerage and mortgage products. In addition to taking advantage of deals on banking, brokerage and mortgage products yourself, you can give your friends and family the gift of financial peace of mind by encouraging them to take advantage of the deals and refer them to the sale. If they sign up, you may be eligible for a $40 referral bonus.
I was selected for this opportunity as a member of Clever Girls and the content and opinions expressed here are all my own.