Paying For College Like a Pro
Top Ways to Pay for College
No matter how you stack it, college is a costly investment. Having enough saved to pay for college is a widespread challenge for students and parents alike. The rising cost of a college education makes that goal a constantly moving target.
We’ve compiled some alternative ways to pay for college while still saving for your retirement.
College Saving: When You Can Start Early
For parents with younger children who are at least 10 years from going to college, a 529 Plan makes good sense. Dollar-cost averaging over a 10-year period can result in a healthy fund that can be used on a variety of educational purposes from tuition to books to tutors. But parents often overlook how they can offset giving in other areas of their child’s life to grow his or her 529 account.
Birthday money, rewarding students for good grades, payments for chores, and even that check from grandma and grandpa can be moved into the account to build the 529 in unique ways that value children and their efforts yet sends a message that as parents you have faith in what they will become and want to help them get there.
College Saving: When You Only Have a Few Years to Save
You’ve probably heard there are creative ways to use life insurance policies to pay for college. Permanent life insurance, properly structured and designed, is one of the only assets that continues to grow even after withdrawals are taken.
Funding a life insurance policy allows you to move cash assets into a policy that doesn’t count against you when you apply for need-based Financial Aid. If the policy has accumulated sufficient cash value to support the loan, policy owners can borrow against the cash value to supplement their college funding strategy.
Layering Strategies to Pay For College
There’s no one golden ticket to paying for college except for the “full ride,” and that’s why parents and students need to make this a joint effort. These top strategies listed below can be layered alongside 529 plans, loans, and savings to ease the financial burden and reduce post-graduation debt.
Grants. This is free money that doesn’t need to be paid back from colleges, states, and even the federal government.
Negotiate. Outside of their GPA, if your student has skills in sports, music, or the arts, you can use that as a tipping point in asking the college for more money.
Work-Study. Students who have some skin in the game are often better students and are more invested in their success. These on-campus work-study jobs can help offset the tuition bill little by little.
Private Scholarships. Encourage your student to get involved in organizations outside of school, Rotary Club, 4-H, and other local organizations and associations who often have privately funded scholarships your student should seek out and apply for.
Home Equity Loans. Loans are the last resort, but a home equity loan is an increasingly popular way to help pay for college tuition. Home equity loans are less expensive, easier to get, and often come at a lower interest rate. But your home is the collateral in a home equity loan putting it at risk if you default on this loan. So, seeking the advice of your financial advisor is crucial before considering this as an option.
Tax Credits. Two tax credits for which you may be eligible for, and reduce the amount of income tax you may have to pay, are the American opportunity credit (AOC) and the lifetime learning credit (LLC). But there are other types of benefits which reduce the amount of income tax you may have to pay, too. You generally can't claim more than one of the benefits or the same qualifying education expense, so consulting your financial advisor on which make the best sense is the first step. Learn more about all types of benefits like deducting student loan interest or tuition and fees at IRS.gov.
Consult Experts First!
Bradford can work with you to help you better understand the best ways you can save for college and retirement and still achieve your goals. Reach out to any of our experts to learn more.