If you\u2019ve got a child headed to college this fall, chances are they received their acceptance letters in March or April and are making plans as we speak. That means it\u2019s go-time for you, too. If you don\u2019t have a clear plan of action for funding your child\u2019s education\u2014or you do, but need some additional advice\u2014we\u2019ve got you covered.<\/p>\n\n\n\n
Paying for college is no easy feat, but there are a number of tried-and-true methods you can use to avoid the pitfalls that too-often lead to massive debt for both students and their families. The following 11 strategies offer ways to pay for college that can help you be better prepared, whether your child\u2019s college education is years away or right around the corner.<\/p>\n\n\n\n
If you plan on sending your kids to college, your first and most important step is to invest in a savings account that\u2019s specifically designed for funding a college education. Surprisingly, many parents aren\u2019t aware that such plans even exist.<\/p>\n\n\n\n
According to new data from Morningstar, only a small percentage of American families are taking advantage of tax-favored college savings accounts<\/a><\/u>. That means they\u2019re missing out on thousands of dollars in savings that such plans can provide.<\/p>\n\n\n\n With accounts like the 529 plan and the Coverdell plan, you pay no taxes<\/em> on the account\u2019s earnings. You can also withdraw funds at any time provided you use them for qualified education expenses.<\/p>\n\n\n\n There are several different types of college savings<\/a><\/u> plans available, each with their own rules, benefits, and restrictions, so it\u2019s important to carefully research your options before choosing the right one for your children\u2019s education costs.<\/p>\n\n\n\n Worried that it\u2019s too late to invest in a 529 plan? The good news is that it\u2019s never too late. Yes, it\u2019s better to start as early as possible, but you\u2019ll still benefit from the tax advantages regardless of when you open the account. Plus, you can switch beneficiaries at any time, which means that if your first child quits college, you can use it for your children who will be attending college in a few years\u2019 time.<\/p>\n\n\n\n The Free Application for Federal Student Aid (FAFSA) form helps determine both current and prospective college students\u2019 eligibility for government-sponsored financial aid. Even if you don\u2019t think your college-bound kid qualifies for financial aid, experts still recommend that every student to fill out the FAFSA form<\/a><\/u>.<\/p>\n\n\n\n \u201cMany students choose not to apply for FAFSA because they think that federal college aid is only available for those less fortunate than they are,\u201d says CNBC careers reporter Abigail Hess. \u201cBut in fact, most Americans are eligible.\u201d Aid is available to any household that makes under $250,000 a year, which means only about five percent of families (i.e., the wealthiest in the U.S.) don\u2019t qualify.<\/p>\n\n\n\n Federal aid comes in four main forms: grants, scholarships, work-study programs, and loans. While most grants and scholarships don\u2019t need to be repaid, a federally sponsored student loan is just like any other loan in that you\u2019ll be required to pay it back, with interest.<\/p>\n\n\n\n However, federal loans offer a number of important advantages over private loans. Interest rates on federal college loans are almost always lower, credit checks and cosigners are generally not required, and payment plans tend to be more flexible. The Consumer Finance Protection Bureau (CFPB), a government agency that protects consumers from unfair financial practices, recommends exhausting all federal aid resources<\/a><\/u> before applying for private loans.<\/p>\n\n\n\n Once you\u2019ve chosen a savings plan, it\u2019s a good idea to set up automatic contributions as soon as possible to ensure that you\u2019re contributing to your kid\u2019s college fund every single month. The sooner you start, the sooner you\u2019ll become accustomed to the expense and learn how to adjust your budget<\/a><\/u> accordingly. With some college savings plans, you can even automatically divert a portion of your paycheck directly to the account before it ever reaches your own bank account.<\/p>\n\n\n\n Experts also recommend checking in with your automated savings plan every year and making any necessary adjustments if your financial situation has changed. For example, if you\u2019ve received a raise in the past year, you can probably afford to increase your monthly contributions.<\/p>\n\n\n\n Contributions to your kid\u2019s college savings plan can come from a variety of sources, not just your household income. Consider contributing at least half of any work bonuses, tax refunds, or inheritance money to the account.<\/p>\n\n\n\n Worried about contribution limits? With the 529 plan, there\u2019s a loophole that allows you to contribute up to five years of funds all at once\u2014that\u2019s $75,000 per parent\u2014without triggering the $15,000 yearly limit.<\/p>\n\n\n\n Since the mid-50s, college-bound teens have had the opportunity to earn college credit simply by scoring high on advanced placement (AP) courses. Now, organizations like the Modern States Education Alliance<\/a><\/u>\u2014a philanthropic group working to make college more affordable\u2014are offering high school students the chance to take advanced placement courses via the College Level Examination Program (CLEP) for free<\/em>.<\/p>\n\n\n\n To participate, all your student needs is internet access to take the courses and proximity to a CLEP testing center to take the final exam. Students who pass eight exams even have the potential opportunity to bypass their entire freshman year of college. (One caveat: not all universities accept CLEP results, so make sure your student\u2019s chosen school is a participating institution before exploring this option). <\/p>\n\n\n\n Choosing the right school is a huge decision, and affordability isn\u2019t your typical teen\u2019s highest priority. That\u2019s why it\u2019s important for your child to understand that just because an elite private school has a high price tag, that doesn\u2019t automatically mean it will provide them with the best education or experience.<\/p>\n\n\n\n In fact, public schools have some significant advantages over private schools, such as a wider array of academic options, greater diversity of the student population, larger athletic programs, and more on-campus employment options.<\/p>\n\n\n\n Paying for college doesn\u2019t have to rest completely on your shoulders. After all, the expense of a college education is so much more than tuition, room, and board. For many teens, college will be their first real foray into the world of personal finance, and a chance to learn how to budget<\/a><\/u> for recurring expenses like textbooks, meals, and transportation. So if cash flow is tight, encourage your college student to get a part-time job.<\/p>\n\n\n\n There are numerous on- and off-campus jobs available to students that can help them stay afloat financially without taking too much time away from their studies. Tutoring, dog walking, babysitting, and serving as a barista or bartender are just a few of the many options. Some employers such as Disney, Starbucks, and Chipotle even offer tuition reimbursement plans.<\/p>\n\n\n\n Depending on where your child goes to school, living off campus could potentially save you thousands of dollars in room and board. According to a recent study by Trulia<\/a><\/u> comparing on- and off-campus housing prices in 48 of America\u2019s biggest college towns, living off campus was either the same price or cheaper than living on campus. If your student is attending college in one of these towns, it\u2019s worth exploring off-campus housing to see if it will save your family money.<\/p>\n\n\n\n If your child is attending college in or near the city or town where your family lives, the most affordable \u201coff-campus housing\u201d is obviously going to be your family home. Though there are certainly downsides to this option\u2014namely your child\u2019s independence and your chance for an empty nest\u2014the amount of money you\u2019ll save on rent, plane fare, food, laundry, and other household amenities is hard to ignore.<\/p>\n\n\n\n Plus, there\u2019s one more huge potential upshot to having your college student live at home: the money you and your student save on room and board now may mean they don\u2019t have to move back home after college.<\/p>\n\n\n\n There are now a number of credit cards designed exclusively to help parents save money for college by offering cash-back rewards on purchases that can be directly deposited into a 529 savings account.<\/p>\n\n\n\n If you decide not to invest in a 529 plan, you can still use virtually any rewards card to save money for college. All you need to do is redeem your rewards and then deposit them directly into your chosen savings plan.<\/p>\n\n\n\n How often do those birthday checks from the grandparents actually wind up making it into your teen\u2019s college fund? If you\u2019ve opted for the 529 plan, family and friends can contribute money directly<\/em> toward your child\u2019s higher education whenever they like thanks to college gift registries like GiftofCollege<\/a><\/u> and Ugift529<\/a><\/u>.<\/p>\n\n\n\n Whether the gift is meant to celebrate a specific event such as your child\u2019s first birthday or high school graduation, or simply a lump-sum donation to help you meet your savings goals, college gift registries offer an easy, modern way to let loved ones help you and your family pay for your children\u2019s education.<\/p>\n\n\n\n2. Apply for federal aid<\/h3>\n\n\n\n
3. Automate your savings<\/h3>\n\n\n\n
4. Take advantage of any windfalls<\/h3>\n\n\n\n
5. Explore advanced placement classes for college credit<\/h3>\n\n\n\n
6. Choose an affordable school<\/h3>\n\n\n\n
7. Encourage your college student to pitch in<\/h3>\n\n\n\n
8. Consider off-campus housing<\/h3>\n\n\n\n
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How to Afford College When You\u2019ve Got Time<\/h2>\n\n\n\n
9. Open a college savings rewards card<\/h3>\n\n\n\n
10. Enlist your community<\/h3>\n\n\n\n
11. Save strategically<\/h3>\n\n\n\n