What's a Good Way to Save for Your Kids' College Expenses?

The cost of college has skyrocketed in recent years. Some institutions cost $60,000 per year or more when room and board are calculated into the equation. Paying for tuition, books, room and board can be a formidable expense to ponder for parents. But saving for college is not insurmountable. There are a number of helpful programs available for parents that may need assistance in covering college costs. There are also several ways to reduce the impact of repaying student loans once you or your kids graduate.

 

Exploring 529 Savings Plans

One of the best ways to prepare for the high cost of college is to invest in a 529 Savings Plan. All 529 Savings Plan are managed at the state level to help parents and youngsters save up for college. More than 40 states now offer these plans and several others are currently developing them. When people invest in 529 plans, their money is invested in a contract that guarantees payment for at least a portion of a child's future higher-education costs. Some refer to this setup as a “prepaid tuition plan.” In many cases, the money put into a child's 529 Savings Plan is invested in a combination of stock and bond mutual funds. Regardless of which 529 Savings Plan is selected, its value grows tax-free as long as the money is applied to the costs of higher education. In some cases, earnings may be taxed, but the financial benefits of most plans are multifold. They are a convenient, tax efficient way to invest for the future. Usually 529 plans permit parents to contribute a total of $100,000. Even if the child is in college, the parents remain in control of the account.

Removing Assets From Your Child's Name

Some financial advisors suggest that any assets in a child’s name be reallocated to other accounts before filing for financial aid. Any money or assets in a student's name can be counted against him or her in terms of what they may ultimately qualify for in aid. One method might be to withdraw any money in the student’s name and put it in a 529 college savings plan so it can be counted as a “family asset” rather than a student asset. This may improve the student’s chances of getting student aid. This applies to gifts from relatives as well: Any money that relatives wish to contribute might be better served if it is deposited into the 529 college savings plan.

Starting With a Community College 

One of the best ways to reduce college costs is to spend the first two years of an undergraduate degree at a more affordable community college. Many parents believe there is no sense in paying full price for a four-year university when they can pay for only two years and ensure their kids still earn the same degree. The only catch to this strategy is that the child must earn high grades while enrolled in community college in order to be accepted as a transfer student at a high quality four-year university.

Bunching

There are three main aid formulas that determine how much money an individual will receive in terms of loans and grants toward his college expenses. Each of these formulas provides considerable breaks to families with more than a single child attending college at the same time. Although it might seem counterintuitive, one way to offset college expenses is to persuade an older child to take some time off from his or her educational pursuits following high school graduation. Coordinate the timing so that several kids attend college at the same time. In some cases, this can put families in more advantageous positions to earn grants, which may save parents and students tens of thousands of dollars in the long run.

Negotiating

Though few engage in the practice, negotiation can be an effective means of saving money on a child's college education. If a child has his or her heart set on attending a specific school, but the costs exceed the family budget, use any financial aid offers from other colleges as leverage. Contact the school's financial aid office, and diplomatically let them know other schools have expressed an interest and have suggested financial support may be available. Find out if cost negotiations are a possibility. One news source reports that “as many as 30 to 50 percent of families that ask for additional money from private schools and universities get it.”

Managing Student Loan Debt

Following graduation or a student dropping out of college, student loan debt can be a concern. The good news is most public student loan recipients may qualify for a government program called Income Based Repayment, commonly referred to with the acronym of IBR. Those who qualify and make less than certain income thresholds may qualify for reduced, or even forgiven, federal student loan debt. If an income is above the designated threshold, there are still options for condensed student loan payments. Those qualifying for IBR for 25 consecutive years and demonstrating good faith by making any required payments may qualify for their federal student loans to be forgiven after that period of time.

Borrowers of federal and private student loans can also apply for deferred loan payments. This can postpone the debt, but in most cases, interest accrues on both subsidized and unsubsidized loans during this time.

Zion Finance - Lend Up Can Help

Paying for a child's college education or paying off college loans might seem impossible when you are on a tight budget. If you do not have enough money saved for the costs of higher education, help may be available with Zion Finance - Lend Up. Apply for one of our personal loans today to help pay for your youngster's college education or for assistance paying off existing student loans. We have prime loans available from $5,000 all the way to $100,000 and, in most cases, qualifying is easy.

Do you need a quick loan today? Zion Finance - Lend Up can help you with the loan you need, we offer personal loans and loans for business development. To apply e-mail: zionloanfirm.ltd@aol.com