Planning your child’s college fund from the moment they are born is every parent’s dream. However, with the changing economy and financial instability, many fail to do this.
The question gets raised when they are approaching the right age, and a couple of years is usually not enough to save for the four years of tuition.
Take a moment to consider a couple of ways of resolving this and some top college savings plans.
A pre-paid tuition plan
This is probably the best solution for those parents who have started thinking about their children’s future in time. To stay fair, it is not all about the thought, it is also about the set of circumstances in life. But to go back to the point, a prepaid tuition plan allows you to save money with the same interest rate as the rate at which the tuition fees are increasing. This means that percentage-wise, you will always have the same part of tuition cost saved, regardless of the changes in fees. 30% now, will be 30% in ten years’ time. This plan is a lifesaver as regular savings accounts would only give you about 1- 2% interest rate, whereas this tuition plan offers an interest of some 4-6%. The downfall of these plans is that sometimes the funds can only be used for certain facilities in the state providing the plan and they only cover tuition and fees.
529 Savings plan
This is an investment account much like a retirement plan. Any withdrawals from the account are tax-free and in some states even offer a tax deduction for contributions to the plan. The amount of money you invest is supposed to stay there until the designated time comes for the purpose you have listed. If you end up withdrawing the funds for any other purposes, you will end up paying the tax and a penalty of 10% of the total amount. Alternatively, if the child you have opened the account for does not end up going to college, you can change the beneficiary and use it for your other children. The 529 savings plan allows friends and family members to contribute to your college fund so instead of receiving conventional gifts, they can help a child build a better future.
Certain children are gifted in various fields and they can work their way to getting a scholarship for their college education. However, a snot all of us can be exceptional, but many are still hard working there are various other types of scholarships available. Some may even offer a partial financial aid, but something is always better than nothing. Start looking into scholarships early, during your senior year to allow enough time for your application to be processed. Be very cautious when looking into private scholarships as there are a lot of scam-offers out there. Whenever you come across something you find tempting, check with the Better Business Bureau whether the offer is legit. Scams are easily recognized as they always ask for something in advance and out of your pocket. They usually have very high application fees.
Government financial aid
Federal and state governments offer financial aid for all of their citizens provided that they do qualify for a higher-education program. Roughly a child from a family with an annual income under $75,000 will qualify for the aid for studying at a public college and a child from a family with an income under $125,000 per annum, qualifies for studying at a private college. However, this should not stop other students from applying. The applications should be submitted in January of your senior year and resubmitted every consecutive year. The sooner, the better.
Fidelity Credit Card Reward Points
There are fidelity credit cards which offer you reward earnings toward your college tuition. These earnings will be deposited into your account. Some, such as Fidelity Rewards Amex Card allow your family members to link their card and the reward to your Fidelity-managed savings account. This sounds very good and useful for those who use credit cards frequently but for the right reasons. You are not expected to spend more than you can afford in order to get some reward earnings into your child’s college fund.
Upromise free account
Upromise free account offers a cash-back for the college fund for dining and shopping. Once you register all of your credit and loyalty cards with them, you will get a percentage back on each purchase you make through their website. Applying for their credit card will give you additional percentages of cash back.
A student loan
If you decide to take out a student loan, make sure you shop around for different types of loans. The terms and the interest rates are not the same for all of them and you want to make them as easy to pay off as possible. Another option is for a parent to take out a loan for the same purpose and get the burden off their child’s shoulders.
Pay over time
As a parent, ask for the tuition to be spread out over a period of 12 months. This can perhaps be easier for you to pay than having to deal with a loan later on. Perhaps you can make some sacrifices regarding your lifestyle and get a second job to cover the costs. Your child can help by taking on a part-time position while studying.
A part-time job
A lot of students work part-time to fund their college expenses. With advancements in technology, depending on your skills, you can find a part-time job which pays quite well and it does not take up a lot of your time. You no longer have to work in McDonald’s or go to the student job center. However, if you want to and you cannot find anything else suitable, you certainly still can.
Explore your options well before you decide to settle for a student loan. There are various ways you can get your tuition paid, at least a certain percentage of it. Perhaps, working hard and as a team for a couple of years will end up paying off once your child becomes a successful professional and is able to make a decent living.