Costs of College
Most parents look at the costs of college these days and sprout automatic gray hairs. According to FinAid.org, college inflation rates are double the rates of general inflation, which means that the costs of college double every decade. While there are plenty of financial aid programs available, students are loathe to pay interest on those loans for twenty years after graduation.
Unfortunately, it is almost impossible to get ahead in today’s job market without a college degree. Adults who have been out of school for fifteen years are headed back to the classroom in an effort to boost their salary potential. While college is certainly worth the costs, however, it helps if you can mitigate the damage to your bank account in some way.
One of the ways that parents are cutting down on college costs is by joining Citi Bank’s Upromise program. When you sign up for a Upromise account and use your Citi Upromise Platinum Select card, you can earn 10% for your college savings at grocery stores, 2% at gas stations and 1% at all other stores.
You can also lower your college costs by signing up for a college savings plans. Most banks and credit unions have some variation of this service, some with high interest rates. You can visit CollegeSavings.org to find out more about college savings plans in your area.
According to the money gurus at MSN, the best college savings plan is still the 529. Because it is tax-deferred and holds no penalty for withdrawals (as long as they are for educational purposes), you can save for college costs while still retaining control over the account. A 529 plan can also be beneficial if you or your child is planning on staying in-state to go to school. Many colleges offer tax breaks for college plan contributions, which can help you out with college costs even more.
If, however, you have been swayed by the recent bad press associated with high fees on 529 plans, you might want to go with something more flexible, such as a Coverdell Education Savings Account. This savings plan is tax-deferred as well, but allow for a broader range of inside investments, including mutual funds and bonds. The negative side is that the Coverdell must be used by the time the beneficiary is thirty years old, while 529 plans have no age requirements.
The benefit to both 529 plans and Coverdell accounts for mitigating college costs is that neither of the plans is considered when a student applies for financial aid as long as he or she is not the one who opened the account. This allows students to apply for financial assistance toward their college education even when their parents are footing part of the bill.
All of these are great options for lowering college costs, but only if you start saving early – usually ten or fifteen years before the student heads off for college. If you’ve found yourself at your child’s eighteenth birthday and you don’t have a savings plan, you’re going to have to find other ways to pay for tuition and other associated costs.
In some cases, it is financially beneficial for parents to apply for a personal loan for college costs rather than for the child to apply for financial aid. If the parents have good credit history, they might be able to secure a lower interest rate. The only problem with this scenario is that an arrangement must exist between the parents and the student as to who will pay the loan back.
Remember, also, that college is a great time for students to begin establishing credit history. Signing up for programs like the Wells Fargo College Checking Account or the Bank of America Student Visa Platinum Plus card can help you purchase your books, groceries and anything else you need at college while taking a load off your parents’ minds. Paying for college costs is a joint venture between parents and students who are devoted to education.