Parents have several options when saving for their children’s post-secondary education. Taking the time to make a plan when kids are young, relieves much of the pressure and anxiety that comes along with figuring out a way to pay for ever-increasing college costs. Also many parents get protected from ID theft to ensure that they will not have bad credit that will affect their children.
Banks like Wells Fargo offer college savings plans for parents that simplify savings and come with important benefits. For example, the 529 Plan protects parents from paying federal taxes on money set aside for college tuition, room and board and other related expenses.
Generally, states offer two options for a 529 plan. The first option is a prepaid plan that allows parents to purchase tuition at the current prices instead of what college will cost in the future, according to USAToday.com. The second option is a savings plan that works similar to a 401(k).
Some people are eligible for federal tax credits as well, including the Lifetime Learning Credit and the American Opportunity Tax Credit. Getting money back on taxes creates more funds to save.
Payments for these plans may be as low as $15 per month. Funds are available for use at colleges and trade schools within the United States. Students can use the money for undergraduate, graduate and post-graduate programs, according to WellsFargo.
Parents who need a little extra cash to make payments into their college plans should consider home or auto refinancing. Refinancing involves transferring loans from one creditor to another. This allows people to save money and get lower monthly payments, which could create room in parents’ budgets for putting money into a college savings plan.
The sooner parents start saving the better. According to CNN.com, putting away $100 each month for 18 years gives parents $48,000 to put toward their children’s education, with an eight percent annual return.
Saving $48,000 may not cover the entire cost of a college education, but parents can take comfort from the fact that many students qualify for grants from the state or federal government. Private grants are also available.
Scholarships may also fill in the gap between what parents can save and the price of a college education. There are several free websites that offer leads to national scholarships. Parents can speak to their child’s academic adviser for help finding local and national scholarships too.
Community college is significantly cheaper than even in-state tuition and definitely cheaper than private or out-of-state schools. Even one year at a community college lowers the overall cost of a college education. Students can get basic classes out of the way and save tons of money per credit.
Two years of community college is even better. According to GoodHousekeeping.com, the cost for a year at a private university averages out to be around $30,000. The cost of a state school is around $13,000. The average cost of community college is $2,000 and children can live at home. This would result in a $22,000 savings if a child goes to community college for two years instead of a private school.
The sooner parents start saving the better, but the sooner kids start chipping in the better as well. Although working while attending college is difficult, children can work part-time during high school. Summer is a particularly good time to make money that can be saved for college. Working in high school also gives kid’s experience that may help them obtain an internship during their college years. Internships or part time jobs make it easier for students to pursue a career after graduation and start repaying any student loans.