College is expensive and thus if you don’t plan well, it will wear you down as a parent. According to ValuePenguin researchers, the average cost of college for the year 2017-2018 was $50,900 for private colleges, $40,940 for public colleges (out of state) and $25,290 for public colleges (in state). Though education is expensive, it is essential for every child. Through college education, students are equipped with the knowledge and skills necessary to start their career. However, due to lack of proper financial planning by the parents, many children end up not going to college. For some, they manage to get through college but graduate with so much debt that it affects them for years afterwards.
This article highlights some tips you can consider as a parent to get your child through college without causing a huge financial burden on either you or your child.
Start a College Savings Plan Early
As a parent, you should start saving for your child’s college education as early as possible. By having a goal and setting aside some money every month after the child is born, you will have enough to pay for college by the time they graduate high school. Even when you don’t hit the goal, having some savings will be better than having nothing at all. Most parents will put their savings in a 529 plan or a savings account.
A 529 plan allows parents to save for their children’s college and get tax benefits such as tax free withdrawals. In addition to college, you can also use the plan to pay for K-12. Anyone can open the account provided they are 18 and over. Also, the beneficiary doesn’t have to be your biological child. Thus, you can save for your kids or any other child you may be sponsoring. Another huge benefit of using a 529 plan is that you can change the beneficiary anytime without incurring costs. For instance, if you are saving up for your firstborn and they refuse to go to college, you can change the beneficiary to your next child or any other child.
If your current earnings are not enough to save for college and retirement, consider the following tips:- Work extra hours: Consider working extra hours or taking a part time job to boost your income. By working an extra hour, or few hours, every weekend, you will have something to save at the end of the month. However, don’t take too many shifts that you end up neglecting spending time with your children. The time you spend with them is valuable. Also, by spending time with your kids, you get to know what is going on with their lives.
Encourage Your Child to Save Too
Talk to your child about the cost of college and the role they can play in ensuring they get through college smoothly. You should encourage them to save part of their gifts and allowances for their future education. Kids do get lots of gifts, especially from grandparents, uncles and aunties. However, don’t ask too much from them. Every dollar they get doesn’t have to go into the savings account. When your child starts working, encourage them to make a budget and decide what percentage of their earnings will go into savings for college.
If your child gets a scholarship, you won’t need to spend so much to get them through college. To boost your child’s chances of getting a scholarship, encourage them to work hard in school and get good grades. Taking part in extra curriculum activities and community projects can also help. However, scholarships aren’t guaranteed and thus don’t place all your hope on them. Your child may or may not qualify even with good grades. Also, some scholarships don’t pay the entire college fee.
Finally, if the savings and scholarships aren’t enough to pay for college, consider loans. Both you and your child can apply for loans. You have five options when it comes to borrowing to pay for college. One, as a parent you can borrow from your 401k savings. The loan limit from this plan is $50,000 or 50% of your balance, whichever is lower. If you choose to take a 401k loan, make sure you evaluate the risks. Pay close attention to what may happen to your savings in the event that you are unable to pay back the loan on time.
Two, you can take a personal loan out from the bank or online lenders. Three, you can borrow money from a family member and pay it back later. Four, your child can apply for a student loan from the government. Finally, you can consider a personal loan for your child. There are a couple of lenders who offer personal loans to students. For a student with below average credit scores, you may want to look into bad credit student loans. When your child is applying for a loan, advise them to request only what they need to cover tuition and other expenses. This will keep them from graduating with a huge financial debt.
These four tips could be helpful in paying for your child’s college education. When you plan early, you will be prepared by the time your child starts applying for college. Also, note that the fee structures for each college are different. Therefore, go through the different options with your child and make comparisons. This is especially important when your finances are low.