One day you’re holding your new born baby and the next thing you know that same child is graduating high school and going off to college. The time goes by fast. And we all know how astronomical the cost of college can be, but the last thing we as parents want to do is saddle our kids with a large sum of debt as they’re launching into the new world of adulting. So what are students and parents to do?
Unless your child has a full-ride scholarship, there is no one best way to pay for college, and you may end up using a variety of methods to pay for school. Here are ten ideas to help you decide which methods are best for your unique financial situation.
Savings - Remember that infant you were holding in your arms? Did you know if you put away just $10 each week for 21 years you would have saved almost $11,000? While it’s not enough to pay for four years of school, it certainly could get your child started. If you made it $20, you would have double. Not bad for a small amount per week that you would probably hardly miss.
Life insurance policy – The main purpose of a life insurance is the death benefit, but did you know that you can borrow against some policies, which could be a viable option for paying for college. You will want to keep in mind any tax laws. “How to use life insurance to pay for college” from Marketwatch may be helpful in explaining how this could work
529 – 529s have been around a while now and are helpful when you’re talking options paying for college. For more details about 529 and how they work, click here.
School reimbursement programs – Some companies still offer this as a perk to their employees. Some even help the employee themselves and/or their children. Check to see if your company offers this.
Invest in real estate - This may be a bit riskier than some other options, but it has merit if you’re in an area that has good real estate appreciation. How it works is, you buy each of your children a house soon after they’re born. You rent it out while they are growing up and by the time they get to be college age, they have a nice nest egg from the rental profits. Then sell the property when the child goes to school. If the house is in a strong area, the equity will cover most of the tuition and then some. Here’s an example of someone who successfully used this option from a Forbes article dated November 28, 2016, “How I used real estate to completely fund my kid’s education.”
Look for scholarships – Not all scholarships are academic or sports related. There are all kinds of websites that offer money for kids going to school. The sites include:
In addition to these websites, there is also a book that is very helpful, “The Ultimate Scholarship Book, 2020.” Each scholarship has a different requirements and deadlines. You can check for other scholarship options with your high school’s guidance counselor.
FAFSA – Even if you don’t plan for your child to take on any student loans, go ahead and complete the FAFSA. Why? Because your child may be eligible for grant money and/or a work study program that doesn’t have to be paid back. It’s definitely worth the time it takes to complete the form.
Corporate and Private Organization scholarships – Associations like Horatio Algers and more routinely give scholarship funds to deserving students.
Student Loans – While most would prefer no debt at all, sometimes there’s just no way around it. But students don’t have to accept the full amount of loans granted, so utilizing some student loan funds may an option. The key is to make sure the student borrows a limited amount to minimize the total amount of debt for later. Decide on a comfortable cap amount and stick to it.
If you’ve already racked up student loan debt, CDC FCU has teamed with Fiducious to help you. For more details on Fiducious and how they can help, click here.
There are a couple of things as parents that you shouldn’t do when it comes to paying for your child’s education. Don’t go into debt for your child’s education or put your own finances in jeopardy, and don’t sacrifice your own retirement for your child’s education.
On the flip side there are some other things that can also be done to keep the cost of college down.
Don’t pay out of state tuition. Have your student go to a smaller, local school. Chances are tuition and fees aren’t as costly as some of the larger schools.
Cut costs by staying at home, at least for the first year or two.
The student can off-set the cost of school by working part time throughout the year or full time during summers.
What are some others ways you’ve paid for college? Tell us how in the comment section of this blog post.