Whether your children are toddlers or teenagers, you are probably concerned about the cost of their college education. While federal aid is available for many students, some families may not qualify but could still struggle to cover the cost of tuition, room and board. In other cases, federal aid might not be enough. The tips below can help you find other ways to help your child cover the cost of a college education.
529 Savings Plans
A 529 savings plan is the first stop for many parents, grandparents and doting aunts and uncles who want to help kids pay for college. These plans offer tax benefits, such as deductions for contributions and tax-deferred growth as long as withdrawals are used toward education. A 529 plan varies from state to state, so you should find out what the rules are for your state. You can create a 529 plan while your child is still an infant.
People usually use Roth IRAs to save for retirement, but they can be used to pay college expenses as well. Withdrawals for your child’s education are tax-free and penalty-free if they are simply the amount contributed. One advantage of a Roth IRA over a 529 plan is that it offers more flexibility. If your child decides not to go to college or puts it off, you can still use the money toward retirement. There are some complex issues based on your individual circumstances involved in deciding whether it is better to create a 529 plan for your child or use a Roth IRA, so you may want to talk to a financial advisor about the best option for your family.
If your child does not qualify for federal aid or you need to supplement it, private loans are another option. These are sometimes difficult for students to get on their own, but you can help with the approval by being a cosigner. This can also help lower the interest rate your child is offered. You can research private student loans online and find out what options might be available.
There are a number of other options, and you can help your child research those options based on their aptitude, ambition and career path. For example, if your child is interested in joining the military, there are several tuition assistance programs available. Another option is going to work for a company that pays college tuition. Some colleges offer free or reduced tuition for staff.
Private scholarships and grants can be a lucrative source of funding for college, ranging from a few hundred dollars to offering students full tuition and more for four years. Some scholarships are very specialized and do not have many applicants, so it is worth digging into what may be available. A common mistake that parents and children make when looking at colleges is assuming that public state universities are always cheaper than private ones. While this is usually the case when it comes to tuition costs, some private universities may offer financial aid packages and scholarships that outstrips what a public university may have available.