12 Tips to Save Money for Your Kid’s College Fund
Despite a tight budget, Casey Slide was able to graduate summa cum laude from the University of Florida with a degree in Industrial Engineering. She shares tips related to smart shopping and money management on Money Crashers Personal Finance.
Here’s a scary statistic: Recent college graduates left the academic world with an average student loan debt of $25,250. This is a new record, and with the increasing costs of post-secondary education, one can guess that the number will only continue to grow.
Aspiring to earn college scholarships and grants is one way to reduce the burden of the cost of college, but they’re not guarantees. Is there something you as a parent can do to help your child pay for college education, and avoid graduating with $25,000 in debt? Fortunately, there are a number of ways you can ease the future financial burden on your children.
Minimizing College Costs
1. Encourage Hard Work
The best way to minimize the cost of sending your child to college is to encourage her to work hard from an early age. By working hard in school, your child will have a better opportunity to earn higher grades, which in turn can result in scholarships. Additionally, if your child also works hard outside of the classroom, she may still be eligible for scholarships through sports or other various activities.
Encourage your child to learn the true value of a dollar by helping her land a part-time job to save up for college. Not only will this allow your child to be a more well-rounded, appreciative person, it will also enable her to earn money for school.
2. Take College Level Courses in High School
When I was in high school, I took many AP (advanced placement) courses that were taught at a college level. These classes allowed me to take a test to earn college credit. In addition to AP courses, I also participated in dual enrollment, a program for high school students to take classes at a local community college for free to earn both high school and college credit.
All of the courses I took added up, because when I went off to university after high school, I enrolled as a sophomore. By trimming an entire year off of my college education, I saved thousands of dollars. Check with your child’s local school district to see what opportunities are available to high school students to earn college credit.
3. Start at a Community College
There is nothing wrong with going to a community college. Actually, the choice is quite smart, because you can save up to tens of thousands of dollars on tuition, textbooks, and room and board if your child continues to live at home. It will also allow you to keep an eye on your child as she moves from being a child to an adult, which is just an added bonus from a parent’s perspective.
4. Take Online Courses
Many colleges are taking advantage of technology by offering online programs. Just as with community colleges, this is another big money saver. While some online courses are still costly, you can save a ton in room and board if your child takes these courses while still living at home.
5. Apply for Financial Aid
Receiving financial aid can be a viable option for students. Not all students will qualify, but you and your child should be sure to fill out the Free Application for Federal Student Aid (FAFSA) to find out how much you are eligible to receive. Also, when choosing a savings plan, consider one that will not negatively affect your child’s chances of receiving financial aid, such a Roth IRA in the parent’s name.
6. Receive College Tuition Reimbursement
Many companies, such as Google, Boeing, and Bank of America, offer employer tuition reimbursement for their employees. Working during college at one of these companies is an excellent way for your child to get practical work experience while getting an education. Additionally, this will help ensure that your child will have a job upon graduating, as well as multiple professional connections.
7. Attend a Work-Study College
Believe it or not, there are colleges in the United States that students can attend for free. The catch? Students are required to work at the school while attending.
An example of such a college is the College of the Ozarks in Missouri, where students work 15 hours a week while classes are in session, and two 40-hour weeks during school breaks.
While attending a work-study college may not be an option, students can apply for the Federal Work Study program at one of over 3,000 participating schools across the country by filling out a FAFSA.
Saving for College
8. Open a 529 Savings Plan
The 529 college savings plan is the ideal savings plan because it is designated specifically for college tuition and other approved educational expenses. These savings plans have several tax advantages, such as state income tax deductions (for some state plans) and tax-deferred growth; however, they are not eligible for federal tax deductions. But as long as your student uses the earnings portion of the money withdrawn on eligible educational expenses, it will not be subject to income tax.
Plans differ from state to state, so it is important to investigate several plans before choosing the one that would best benefit you and your child. 529 plans can be used at colleges within and outside your home state, so there is no need to worry about geographical limitations.
9. Open a Prepaid Tuition Plan
The prepaid tuition plan is an alternative type of 529 plan in which you are able to lock in your child’s college tuition at today’s rates. Unlike the 529 saving plan, you must be a resident in the state in which you open the plan, and the plan can only be used at that state’s universities.
If your child selects an out-of-state college, he or she can still use the money that was saved, but must pay the difference in tuition.
10. Open an Education Savings Account (ESA)
A Coverdell Education Savings Account (ESA) is another great option to save money for your child’s education. What makes an ESA different from a 529 plan is that the funds can be applied to any form of education, and not necessarily just college education. This allows parents to utilize ESA money for private elementary or secondary school.
While an ESA grows tax-free, contributions are not tax-deductible, and withdrawals are tax-free as long as they’re used for qualified educational purposes. Furthermore, there are restrictions as far as parental income and contributions, so this plan may not be for everyone.
11. Earn and Save Through Upromise
Upromise, a subsidiary of Sallie Mae, allows members to accrue money for college through the purchase of qualifying items from grocery stores, online retailers, restaurants, and gas stations. The money can go into a 529 plan or a savings account and then be used as the parents see fit, even if it is not for education.
12. Consider Other Investment Options
If you are an older parent of a young child, consider such investment options as a 401k or a Roth IRA, in which the time to withdrawal from these funds would coincide with the time for your child to attend college. The great thing about this option is that the money is not designated for education, so if your child does not need the money for college, you can use it for other purposes.
If you are able to save for your child’s college education, that’s fantastic, but if you have limited resources, make sure you are contributing to your own retirement before you contribute to your child’s education. While there are many options to pay for college, there are no loans you can take out to retire.
You can also contribute small amounts to help them along the way – if you know you are not able to fully fund college tuition, save and pay for what you can. Maybe you can pay for room and board, or for food and textbooks. By simply setting aside $25 a month while your child grows up, you can still make a big impact when your child leaves the nest.
What tips do you have to help your child save for college?