It’s no secret that college can get pretty expensive.
CNBC reports that tuition fees for four years at a private college averaged $35,830 for the 2018-2019 school year, while for state public colleges it was $10,230. Either way, the monetary cost is no joke — but education is purposeful, and it can only serve to boost income and open up opportunities for your child. While it is possible for them to finance their college education on their own, you might be looking for ways to help them as well. Read on to find out how you can help your child pay for their college tuition.
Start Saving Early
From the beginning, having your child’s long-term future in mind will let you help them when the time comes — don’t wait until they’re a junior or senior in college for you to begin. You can start early by opening up a 529 college savings plan, which is available in every state, and will grant tax-advantages in some. Not to mention, the US Securities and Exchange Commission explains that it is exempt from federal taxes, allowing you to lower your taxable income, and gain compound interest at the same time. As a parent, you will also get full control of these funds throughout the investment, meaning you can determine how or when those funds are used. On the other hand, some parents can also opt to start saving early by saving money from the time their children are born and placing it in a high-yield savings account as opposed to a 529.
Co-Sign a Student Loan
Private loans are used to supplement costs that a student’s federal loans can’t — but it requires a good credit history and credit score that your child doesn’t have yet. This is where you come in. Essentially, co-signing a student loan will make you liable should your child be unable to repay it. However, before co-signing, make sure your child is aware of everything else a loan will entail. Aside from interest rate, educate them on loan terms or annual percentage rates (APR), which Marcus notes is ‘the total yearly cost of borrowing money expressed as a percentage of the loan amount’, or in simpler terms it is the price of borrowing money. Other fees can also include disbursement or application fees, late fees, and even prepayment penalty fees. This way, knowing other terms will allow your child to choose a lender that will give them the best overall loan, while factoring all the risks you’ll be taking on for them.
Consider a PLUS Loan
Forbes reports that over 3.6 million parents have Parent PLUS loans, totaling to $67 billion borrowed. A federal direct loan option, PLUS loans lets parents take out a loan that’s as high as the cost of the tuition, with a fixed rate once the loan is taken out. This means that, regardless of rates rising, the amount you pay won’t change. Free insurance is also offered with this option, which means the debt will be cancelled if the parent or student passes away or becomes disabled. Additionally, PLUS borrowers can get their payments deferred if they get into any financial trouble. However, one disadvantage is that PLUS loans can never be transferred to your child, which means that even after they graduate and start receiving income to pay for the loan, you must hold the note until the loan is repaid in full.
Bonus Tip: Assist Them with Financial Aid
Depending on your financial situation, you can only do so much for your child — they have to take the reins at some point too. Thus, encourage them to apply for financial aid as soon as possible. Our article on the ‘5 Steps to Securing Financial Aid for College’ by Casey Galindo points out that lots of colleges can provide estimates for tuition and room and board each year at school, which can help them determine how much they need to get in grants or federal loans. Create a list of financing options that they can get on top of any help you can provide, and help them compare available loan amounts, interest rates, and loan terms.
exclusively written for houstonfamilymagazine.com By Casey Baldwin