Paying for College

When it comes to saving, sooner is always better than later. But when it comes to planning how you’ll pay for higher education, it’s never to late to make a gameplan. Here’s a look a the various sources of funding that you should consider:

Savings

Without a crystal ball, it can be difficult to predict the exact cost of higher education. However, 529 Savings accounts are an excellent place to grow at least a tax beneficial portion of college savings because they offer:

• Potential state tax breaks for annual contributions

• Tax-free growth for education

• A variety of investment options

• Transferability to other beneficiaries

• The option to be rolled over into a Roth IRA

• Flexibility to pay for K-12 private tuition

Capitalize on Community College

Many high schools offer dual enrollment opportunities that help students earn higher education credits at local community colleges for free or lower cost.

• Make sure that the courses you choose will transfer.

• Be carful not to unintentionally propel your student into applying for and entering college as a sophomore instead of a freshman (>30 transfer credits).

Scholarships

Private

Future collegiates can keep an eye out for opportunities to apply for merit based scholarships sponsored by companies, local businesses, community organizations, etc. as early as 6th grade.

Institutional

Colleges and universities often have their own financial aid programs and scholarships. These can include need-based and merit-based awards. To maximize your child’s institutional aid, research the financial aid opportunities offered by school.

Grants

Grants are typically need-based and do not require repayment. The most well-known federal grant program is the Pell Grant, but many states and colleges also offer their own grant programs.

Loans

The rule of thumb for student borrowing is don’t take out more in loans than you expect to make in your first year out of college. There are two types of student loans:

Public AKA Federal Loans

• Interest set by Congress

• More flexibility in borrowing and repayment

• Subsidized - Borrowers don’t pay interest while their in school or for 6 months after graduation. Only undergrads can receive subsidized loans based on their need.

• Unsubsidized - Borrowers can pay interest while they are in school or add it to the loan principal. Both undergrads and graduate students can apply, no financial need required.

Private Loans

• Interest rates set by banks, which means they are typically higher.

• Interest can be fixed or variable.