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Paying for college doesn’t have to be scary

Parents of high school seniors will soon be facing the reality of paying for college and for some this could be a scary prospect. Most parents want to help their kids avoid massive student loan debt upon graduation and even if you are not fully prepared to pay for college there are still ways to help your child even at this late date.
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 for people in your financial situation.  Work with the university your child is attending to find campus jobs to pay for tuition during the school year. Look for scholarships not only when they are freshman but every year they are in college.
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.  You can also consider paying for college out of current income by reducing other expenses.  What you don’t want to do is use 401k funds or borrow against your retirement. 
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. 
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 making it the best financial option for paying for college. There are several different plans and Indiana has one of the more popular plans.
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. Plus, 529 plans have little impact your child’s ability to receive financial aid.
Are 529 plans difficult to set up?
They are actually fairly easy to establish using online tools.  And 529 accounts can be started with as little $10 and additional contributions can be a low as $10 per month.  An added benefit is that you can change the beneficiary if you don’t need all the funds in the account.
Is it ever too late to start a 529 plan?
Even if you child is starting college in the fall, you might want to consider a 529 plan to receive tax benefits and to continue to make contributions even while they are in college. It is important to understand the tax rules and your situation to make sure it is still beneficial for you.
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.

Posted: 5/26/2017 with 0 comments

Categories: College, Education, Money Matters, Planning, Students

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