How to Save Money For College

Every year the cost of college increases. A common source of worry and anxiety for parents is, “How will we pay for a college education?”

 

While not every child needs to go to college, the benefits of a college education include more than preparation for a good paying job. Kids who attend college enjoy many advantages over kids who do not, including:

Meeting new people and building a network. Sometimes it is true that it is not what you know but who you know that propels you forward in life, and college provides an opportunity to meet many new people who share your interests and who you may interact with later in your career.

Independence and self-reliance. Kids in college have to learn to budget money and their time and how to solve real-life problems on their own.

Explore new interests. Colleges offer more than classwork and lectures. Most colleges offer a wide variety of clubs and activities that are free or at a minimal cost.

And college is an opportunity to learn about yourself. It is no wonder that most parents and children plan to go to college after high school. However, less than 36 percent of middle-income families and less than 29 percent of low-income families have college savings. Do you have a college saving plan for your children? Do you know what you can expect to pay for college? If you are concerned about how your kids will afford a college education, then consider the tips offered in the sections below.

How much does college cost?

What are your college-savings goals? Before you start saving, it helps to know how much you will need. The average cost of a college education can vary widely based on where you live, whether you go to college in-state or out-of-state and whether you choose a private or public college. There are different costs to consider as well, such as tuition, lodging, meal plans, books and supplies and transportation.

Tuition covers the actual cost of schooling and is charged per semester or per credit hour. According to Student Debt Relief, per semester is the better deal. For the 2017 to 2018 school year, the average cost of tuition at a public university for an in-state student is $9,970 and you can expect that cost to go up approximately 3.2 percent per year. Room and board costs are regularly higher than the cost of tuition, averaging around $10,800 per school year, for the same student. There are other costs to consider as well including the following:

Books and education supplies – $1,250 per year

Transportation – $1,170 per year

Activities, clubs and other expenses – $2,100

These expenses add up to an average total cost of $25,290 per year. Out-of-state students can expect to pay over $40,000 per year at a public institution while an out-of-state student at a private university will pay over $50,000. At those prices, it is not surprising that parents and students worry about being able to afford college. There are many ways to save on and save for a college education. By making choices that can reduce the costs, you start with a much lower price tag. And by creating helpful money habits and an intentional plan for savings you can help your kids avoid heavy student loan debts.

Ways to Reduce the Cost of College

By choosing an in-state public university, you reduce college costs over private or out-of-state choices. Additionally, if your child is able to live at home or with a friend or relative, then you will save on room and boards costs, which are the largest expense of a college education. Here are some other ideas to reduce college costs.

Advanced placement classes in high school – Advanced Placement (AP) courses are college-level classes offered in high school with a competency exam at the end of the class. Students who score a sufficient grade on the competency exam can earn college credits. Some high schools offer enough AP classes to cover an entire semester of college. This not only saves on tuition costs but a full semester of room and board as well.

Pre-pay tuition – Many states, colleges and universities offer pre-pay options to pay for tomorrow’s college tuition at today’s prices. With tuition costs going up three to six percent per year, buying all four years of tuition in the first year can save up to 20 percent on year four tuition.

Apply for financial aid – Even if you think you will not qualify for aid, then apply anyway. There are many factors that determine eligibility including siblings in college.

Submit financial aid forms early and completely – Complete these forms carefully and submit them early for consideration for grant money. Grant money is awarded early in the financial aid award process and is awarded for free, as it is not a loan with payment requirements.

Apply for scholarships and grants – Do not overlook the small local scholarships, two or three awards ranging from $250 to $2,500 will add up fast.

Get a job at the university – Employees often get substantial discounts on tuition for themselves and family members. The discount often will extend to other similar schools as well, so you may be able to get a job at one school, while your child goes to another but is still able to use your discount.

Live at home – If it is possible for your child to commute to college or live off campus with friends or family, then it can save on the steep room and board costs at most colleges.

Finish on time – Help your child stay on course to complete college on time or early, this can greatly reduce the overall cost of their degree.

Ways to Save for a College Education

Working to reduce the cost of college is a great help, but you will still need to come up with money to pay for the rest. The most important point to take away is that it is never too early or too late to start saving. The more savings you have, the better off you will be and even a small amount will help reduce the need for student loans. Here are some helpful tips for saving for college:Open a 529 savings plan for your child. 529 savings plans, also called Qualified Tuition Programs (QTP), are offered in more than 30 states. These accounts allow you to invest after-tax money that you withdraw and use toward education expenses tax-free. If the money is not used for that child’s education, then it can be rolled over to another child otherwise some penalties and fees may apply.

Use a Roth IRA – Although a Roth IRA is a retirement savings investment, after five years you can withdraw funds to be used to pay for educational expenses. The bonus is there are no penalties for not using the money towards education, it will remain in the account for retirement purposes. However, the annual investment restrictions are more strict than the 529 savings programs.

Ask for contributions instead of gifts – You can elect to enroll in a contribution program for your child’s 529 savings program and ask friends and relatives to contribute to their college instead of giving toys or cash for holiday and birthday gifts.

Credit card reward programs – Just like the cash back and airline/travel points reward programs you can utilize a credit card with a college savings reward program. Ask your bank or your 529 managing company about these special cards.

NOTE! These cards should be used as a bonus and a convenience. Do not accrue credit card debt in order to fund your education savings accounts. The costs of financing credit card debts will be much higher than the savings.

Other cash-back programs – Search for other programs that kick-back a small percentage of your purchases to your college savings accounts. Some programs like Upromise allow you to rack up cash back bonuses for online and in-store shopping as well as for dining and travel purchases.

Automatic savings deductions – You can opt to have a specific amount of your paycheck automatically deducted and placed into a college savings account.As previously mentioned a special college savings account such as a Qualified Tuition Program is an efficient way to set up proprietary college savings for your child. Once the account is established contributing just a small amount each month can build a decent sized account over the course of 17 years. As a matter of fact, saving just $50 each month from the time a child is born until he turns 17 will yield $20,000 (at 7 percent rate). Starting early will give you a great advantage but it is never too late to start.

 

It might also interest you: