We've saved for college tuition for our children, but not enough. I don't want them to begin their careers in debt, what should we do?
How old are your children? Are you utilizing 529 plans? You may still have time to fund a 529 plan if they're a few years from turning age 18, whereby funding the plans will allow for some deferral, and tax-free distributions on those earnings. Prior to graduation, you might have a few years to fund a 529 plan - 4 to 5 years in college, and possible a few years till they need to begin accessing the funds. They can always attend a junior college for the fist two years, which are very low cost.
Additional options would be to take out a loan in your name through the Federal Parent PLUS program; have the child take out a Stafford loan (subsidized); or have your kids work while in school to help pay for tuition and/or room/board. Grants and sholarships are possibilities too. If you've built-up some equity in your home, a home equity loan might work as well. Hope this helps...Gregg | 09.03.15 @ 16:32
Great question. You’ve saved for your children’s college education. Congratulations! Now, you need to figure out how to pay for it.
The key to being able to afford college is understanding the financial aid system and doing everything you can to maximize that system. Keep in mind that financial aid is a system just like the legal system or the tax system. You can’t just assume you’ll get what you deserve.
I’ll try to simplify this as much as I can:
Financial aid is based on your income & assets and your student’s income & assets. The schools use your information as submitted on the financial aid forms (FAFSA, CSS Profile, &/or institutional forms) to determine your NEED.
1. You need to make sure your children go to schools that meet 100% of need. If the formula says you’re required to pay $10,000 per year and the school costs $50,000 then your need is $40,000. If they give you 100% of the $40,000 then you only have to pay $10,000. Some schools won’t give you 100% and will leave you short. Thus you could end up paying $20,000 or $30,000 per year. This is a HUGE difference.
2. You can increase your NEED (thus increase your financial aid) by legally protecting your assets from the financial aid formula. You need to find a College Funding Advisor for this. Any financial planner, financial advisor, stock broker, etc. is going to try to sell you a 529 plan. A 529 plan will hurt you more than helping you.
3. Look for ways to keep your out of pocket costs as low as possible. Take basic classes at a community college to transfer to the big state school or private school. Make sure the colleges under consideration will accept AP credits. Look for scholarships. (Just know that private scholarships will often reduce need based financial aid)
4. Lastly, know your limits. Don’t go broke in order to pay for your children to go to an expensive school that they really shouldn’t go to. Once you’ve worked with a College Funding Advisor to make sure you’re not set up to overpay, have a plan for paying, and have located the ideal schools that will meet your need… draw your line. Make sure your children know that you have X dollars to spend toward college. If they go somewhere that cost more then X, then they are on the hook.
Please let me know if you have any questions.
| 09.08.15 @ 21:11
I really like Charlie's 4th point. Be smart consumers just like with anything else you buy. Your in-state public junior colleges and universities are partially subsidized by your tax dollars, focus on those schools as they will be the best value in almost every case!
Stay away from expensive private schools that tell you about all the great loans they can help you get. Studies show they just aren't worth the debt burden you'll take on. | 09.09.15 @ 10:35