Tuition fees have jumped in the recent years and it is expected that they will continue growing. If you plan to send a child (or children) to college, chances are, you are concerned about how you are going to afford it.
Here are our tips and suggestions to help you fund college on a budget.
Find out what it will cost and start saving
The first step is to find out how much it will cost you to send your child to college. Basically, that depends on the age of your kid. Tuition fees rise every year, so the younger your child is, the higher the amount you need to pay will be. This, however, also means that you have more time to save.
It was estimated that the annual tuition and fee for the academic 2017-2018 for a four-year state school was nearly $10,000. The cost of a private school can be two or three times higher. The inflation is roughly 5% per year, so if your kid is going to college in 10 years, the cost will be $16,000 for the first year. If you have a newborn and 18 years to college, the expected cost is $24,000 per year on average.
If you plan to start saving, there are a few things that you need to know. First, make sure that you pay off debt before you start the college fund. Putting off debt to save is usually a bad idea as you are accumulating interest and potential fees. The money you save by being debt-free will contribute to that college fund and you’ll be less stressed in the process. Second, experts recommend you put at least 15% aside for your retirement as this is also important.
Consider a college savings plan
One way to make your college savings grow is to set up a college savings plan, like a 529 plan or Coverdell. The plan gives you the opportunity to earn stock-market returns on the money you save. The contributions are tax-deferred until the time comes to use the money for paying college fees. At that moment, the earnings are taxed at the student’s rate. Be careful though: if you do not use the money for qualified educational expenses, you may be hit with a penalty – 10% to 15% of your accumulated earnings or 1% of the total account balance.
Research free money options
There are several resources that can help you with paying the college fees – federal student aid, scholarships, grants and state money. How much you get depends on your EFC (Expected Family Contribution). EFC is a calculation that is done to qualify your child for student aid and your contribution will vary depending on your income and net worth. Help your child research all the options and apply for student aid, as well as applicable scholarships.
Start planning for scholarships early
When your child enters high school, you can really start planning for scholarships. Focus on helping your child find extracurricular opportunities and activities to create a great resume for college. If your son or daughter is particularly good at something – whether it’s art, sport, writing or physics – hire a tutor, participate in competitions and do everything possible to develop their talents. Most scholarships are very specialized, so developing a specific skill early and creating a record of excellent results in that while your student is in high school will increase the chances of getting a scholarship.
Find additional income sources
Another way to add to your budget if you have to pay college fees is to find additional income sources. Your child can help you with this:
- Start working – when in college, your son or daughter can start working on or off campus and thus help with covering some of the college costs.
- Take a gap year – the child can take a gap year before going to college when they can work and gain both some experience and earn money.
If you are still short, consider student loans. When used correctly, they are a great vehicle to help you pay for higher education.