As college tuition costs continue to rise and a college education becomes increasingly important for pursuing many different careers, you may be worried about how your children will be able to afford college. There are still a number of options for paying for a child’s education whether you start to look at options when your children are very young or in their last year or two of high school. Paying for college should be a shared project even if you have saved enough to cover the costs. Although your children are technically adults, this is a time when you can continue to teach valuable lessons about financial responsibility.
College Savings Plan
If you are planning ahead, there are several options for college savings plans. A 529 plan allows tax-deferred contributions that can earn money in the stock market, and it is eventually taxed based on the student’s rate. Some parents prefer to use other investment vehicles, such as a Roth IRA, which allows withdrawals of $10,000 annually before the age of 59 1/2 that are free from penalties and taxes if used for education costs. If you will be older than this when your children go to college, deductions are tax- and penalty-free.
There are many types of scholarships available from many different sources. Some are widely available to many types of students while others have very narrow qualifications. Requirements vary as well, with some that have a relatively brief application and others that want essays and other material. Scholarships that have more demanding applications usually offer more money as well. While it is worth researching and applying for many scholarships, there is a limit to how many hours your child will be able to put into preparing long applications, so these should be chosen carefully.
Work-Study and Other Jobs
Tuition rates are high enough that most students are not able to entirely fund their college education through work, but a part-time job or a work-study program can provide valuable income for some students. Some employers will pay for all or part of employees’ college costs. In some cases, this has to be in a certain field, but others will pay for any kind of degree.
Whether or not there are other funding plans in place, you and your child may also want to consider taking out private loans. In some cases, a loan may be better than more hours at a job if the job is taking away valuable study time. The ability to pay your tuition shouldn’t be a focal point, considering the rigors of a full-time credit load, having a person life, and just taking some time for yourself in general. A federal direct loan is generally the best first choice. In addition, you may want to take out a fixed-rate federal PLUS loan, or you can cosign on your child’s private student loan. If your child does end up needing student loans, they will have the option of refinancing them, or possibly pursuing forgiveness via Public Service Loan Forgiveness.
Your child must fill out a free application for Federal Student Aid to apply for student loans, and grants may be available as well. These are usually need-based and may be awarded as part of an overall financial aid package that includes student loans. Unlike student loans, they do not have to be repaid.