Tips on how parents can save for their children’s college education
Earning a college degree has traditionally been part of the American Dream, and for many years that dream was affordable. But that’s not the case anymore. In 2014, the average college student graduated with over $30,000.00 in debt, and overall in the US, college debt is now over $1 trillion. This leaves parents wondering how their children are going to pay for college, or how they as parents can help them.
Some parents are still paying for their own student loans, on top of their mortgages, living expenses and retirement, so saving for their children’s education can be a daunting task. Here are ten ways parents can approach paying for their children’s college education to help take away those worries.
- Start Planning Early. Start the college planning process early, giving you and your child the time to consider what colleges to apply to and why. Evaluate if the family can afford the tuition, and if not, what are the other options. Waiting until the last years of high school to start the planning process may be too late.
- Get Your Child Engaged In the Process. It’s important to get your child engaged in the process in order to understand the real cost of a college education. Make them responsible for their education as early as possible. Once your child understands those expectations they are more likely to become motivated in high school, where good grades and extracurricular activities enhance their chances for scholarships.
- Assist Your Child in the Quest for Scholarships. Scholarships are free money and are a great way to pay for college. While students who have good grades, are involved in extracurricular activities or have special skills are more likely to get scholarships, there are scholarships for a wide range of criteria (from medical conditions to specific activities to being part of a minority group). Helping your child narrow the application process to scholarships that match his/her skills can save time and resources. FastWeb is a great resource when seeking scholarships. Encourage your child not to only apply for big dollars, but also for smaller scholarships, which can be faster to obtain.
- Look Into Pre-paid College. Pre-paid tuition programs are for future students at participating college or universities. These programs allow parents to invest today, locking in current tuition prices despite any tuition increases before the student enrolls in that college.
- Invest In A 529 College Plan. The 529 College Plan is the most popular investment vehicle for saving for college. Parents invest their after-tax dollars into a 529 plan, and when the money is withdrawn later it’s tax–free for qualified education expenses. By starting investing when their children are young, a 529 plan allows parents to earn more over a longer period of time.
- Invest in Roth IRA. Roth IRAs are commonly used for retirement, but are also a great way to save for college. Similar to 529 Plans, after-tax dollars are invested and are tax–free when withdrawn. While 529 Plans are solely for qualified education expenses, a Roth IRA is more flexible and can be used in other ways if your child doesn’t need or use the earnings.
- Apply for College Savings Rewards Programs. These programs offer free money. Similar to cash back bonuses, some credit cards companies give you the ability to save money toward your child’s college education through purchases. Upromise is one of the leaders in the industry, allowing shoppers at participations retailers to earn cash toward college savings.
- Consider Community College. Community Colleges are a great way to make college more affordable. They are usually cheaper than four-year universities, and can give your child the ability to excel in a less crowded environment while they earn an Associate degree and gain college and life experience. By attending a community college, your child can also evaluate his or her major to make sure that is the right field of study for them. Switching majors at a four year college can add time and credits and at many schools that can be quite costly.
- College is Not for Everyone. While I believe that higher education is important, I also believe that college is not for everyone. Forcing your child to attend college when he or she doesn’t have that desire can be a waste of money; they won’t take their education seriously and might drop out before finishing. Trade schools or apprentices are great alternatives; they provide real world training and job opportunities, and our society is greatly in need of skilled workers.
- Invest In Yourself First. Before investing in your child’s education, make sure to invest in yourself. Maximize the contribution to your own retirement funds first. Your child’s education can wait until they can finance it themselves, but your retirement can’t.
Marco LeRoc is a former international student who graduated from private school Bellevue University in Nebraska debt fee despite paying lofty out-of-state tuition fees. His non-citizen status prevented him from qualifying for any governmental or private financial loan assistance. Marco, who majored in economics, was heavily in debt after his first year in school. This prompted him to create a tactical budgeting and savings plan, which allowed him to pay off his freshman year debt and ultimately his entire tuition before graduation. He shares these plans for high school and college students as well as parents in his book, Screw College Debt.