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529 Plans and other ways to pay for college

Whether you have 12 weeks before your child attends college or 12 years before that big day, there are several ways to fund the cost of college.  529 plans are just one of the many options available to you for funding college education. Knowing all the options is important regardless of how soon your child is heading to college.
What options should parents with younger children consider?
First and foremost, the 529 college savings plan.  It is a great tool and provides many benefits both now and later.  There are many different types of 529 plans, make sure you understand and research the one that is best for your situation.  You can start one for each child if you desire.  You might also wish to supplement 529 plan savings with other saving options that are not education specific to give you a needed reserve.
What is the biggest advantage of the 529 plan?
The two fold tax savings that comes with the 529 plans are the biggest.  First, you will get a tax break for making annual contributions up to $5,000 and the second tax advantage is all earnings grow tax free if used for college expenses. This helps several people find the find the funds to invest because the tax breaks provide enough savings to fund the deposits they want to make in a 529 plan.
What are other options to consider if you have younger children?
Help your child be a great student, especially in the STEM fields. If they get great grades and score high on college exams like the ACT or SAT there will be financial rewards. Top students are much more likely to be offered scholarships and other tuition assistance.  Focus early on in developing your child’s ability to perform well in school.
What if college is only 12 weeks away?
First don’t panic, there are still options available to you.  Start with financial aid and student loans available to you for people in your financial situation.  Also work with the university your child is attending to find campus jobs that will help your student earn money to pay for tuition during the school year. There are ways to pay for college that can include a mix of loans, grants and working so that the student isn’t burdened with huge student loans upon graduation.
Are there other options besides student loans and campus jobs?
Looking at non-student loan options such as home equity loans or personal loans are always good ideas.  Don’t use 401k funds or borrow against your retirement however, those are two very poor choices for paying for college.  And having your child invested in paying for their education is always important, especially when making the choice of which college to attend.
How do most people pay for college?
Most people use a mix of all the options we have discussed above plus borrowing from other non-student loan sources and paying with current earnings.  So don’t be discouraged if your 529 plan isn’t completely funded, there are other options.  Less than 40% of college tuition is currently paid with savings from 529 plans or other educational savings options.

Posted: 5/28/2015 with 0 comments

Categories: Education, Money, Money Matters

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