Paying for college: 529 plans, student loans and more

05/28/2020

If you have children one topic that is often discussed is how to pay for college. Regardless of the age of your child it is always important to consider all the options available. With the 529 plan day coming up this week, now is a good time to talk about all the ways to pay for college.
 
How do most people pay for college?
Most people use a mix of all the options such as 529 plans, scholarships, student loans, 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 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. 
 
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.
                                                                                           
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.  Plus, deposits for the Indiana plan can provide an Indiana tax benefit.
 
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 developing your child’s ability to perform well in school.

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