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If you have a child nearing the college years, it is understandable that you may be feeling anxious about how you are going to foot the bill. Getting a college education is an expensive venture. However, the good news is that there is a multitude of options available to you when figuring out how to pay these rapidly rising costs. Here are five ways that parents can help their kids pay for college.
Start a 529 Account
The gold standard of funding a child’s education is by leveraging the power of dedicated college savings accounts. There is a myriad of options available, making it important that you do your research before committing to a plan.
All 50 states sponsor at least one kind of 529 plan or other types of prepaid tuition programs. Because each type of plan has different rules, you need to be diligent about reading the fine print.
While being intentional about investing in these accounts takes a bit of financial stability, you will sleep better at night knowing that you have done everything that you can to secure your child’s opportunities for higher education.
Apply for Private Loans
While most families are somewhat familiar with the many federal educational loans available, they do not consider going the private loan route. Private loans administered through banks or other institutions often offer a better interest rate. The caveat is that you need to have good credit and the income that will allow you to handle the monthly payments.
You may also want to consider co-signing on a loan in your child’s name. As with any type of loan, be sure to shop around and do your research before signing on the dotted line.
Go Hard After Scholarships
Every year, there are millions of dollars of financial aid that goes unclaimed in the form of scholarships. There is a good chance that there is a scholarship out there just for your child, especially if they are motivated in school.
Your high school guidance counselor is a good resource if you are looking for ways to leverage this money. There are also websites dedicated to helping students find scholarship opportunities that meet their specific qualifications. Be sure to cast a wide net when applying for scholarships. This will ensure that you have the best chance of finding the funding that you need.
Lean on Relatives
You may be surprised at how willing your family may be to help out financially. It is a good idea to reach out to your relatives who have an invested interest in your child’s education. Encouraging grandparents, aunts, and uncles to give tuition assistance instead of a traditional holiday or birthday gifts can really add up over time.
This is a particularly good idea if you have a family that plans on leaving money to your child as an inheritance. If they understand that the child could use the money now, they may be more willing to give up some of this cash for present use rather than waiting until years down the road.
Tap Into Retirement
Although you should never jeopardize your own financial security to pay for your child’s college education, there are instances in which it might make sense to tap into your retirement for this funding. If you are under the age of 59 and a half, you will not likely incur the standard 10% early withdrawal penalties on IRA accounts if you are using the money to help pay for college. That said, you may still be on the hook for the income tax on the distribution amount.
If you feel confident about the money that you have already set aside for retirement, it may be worth it to consider using some of this funding to help your child. Remember that while there are loans for college, there are no loans for retirement. This makes it important that you carefully run the numbers before proceeding with this avenue of funding.
By uncovering every stone, you will be sure to provide your student with a variety of options as they decide how to pay for this education. Your job as a parent is to help them to make the best decisions that set them up for financial success later down the road.