As the cost of college continues to rise, many parents find themselves feeling anxious about how to save enough money to help their children through college. Some parents are looking to have enough put away to foot the entire bill, while others may be looking to be able to contribute a portion. Whatever the final goal may be, here are some possible ways to assist in paying college tuition.
Start Early and Save Smart*
The earlier the savings begin, the more there will be in your accounts. Since the cost of tuition is rising faster than the rate of inflation, many parents are finding stock options to be a great place to help their money grow. Mutual funds can help take some of the pressure off by putting the money in the hands of professionals. There are also two types of 529 plans available for college savings. A 529 Savings Plan works like a mutual fund where a 529 Prepaid Plan allows you to pre-pay all or part of the costs of an instate college tuition. Prepaid Plans can also be converted for private and out-of-state schools. Many people like to follow an aggressive investment plan to start and become more conservative as the time for needing the money draws near.
Use the Help Available*
Not everyone will be able to foot an entire tuition bill. However, there are many opportunities to apply for financial aid from schools and the federal government. Research scholarship options, as many students may qualify because of location, race, religion, major, gender, ethnic background, and other prerequisites.
Understand how the government calculates financial aid. For example, while assets in a child’s name may be taxed at a lower rate, they will negatively affect the aid the student might otherwise receive from a college or the government.
Once tuition payments have begun, parents often take advantage of all tax breaks offered. Learn more about the tax deductions attributed to paying college tuition here (http://www.irs.gov/publications/p970/ch06.html)
Another option to help foot the tuition bill is to open a Home Equity Lind of Credit. Belmont Savings Bank’s PlatinumBlue Home Equity Line of Credit has one of the best rates in the market.
College versus Retirement
Most financial professionals will tell parents saving for the golden years is more important than saving for college. Between grants, federal loans, bank student loans, scholarships and other sources of financial aid, students have many places to turn to come up with their school tuition. When the time for retirement arrives, adults do not. Save for both as much as possible, but when forced to choose, do not feel guilty about workings towards retirement.
*This blog article is not tax or investment advice; please contact your tax or financial advisor for further information.