Saving Money For Your College Education

Saving Money For Your College Education

College education presents a lot of opportunities, but it can also come with a slew of financial challenges. More and more people are realizing the value of attaining higher education despite the huge price tag that comes with it.

Paying for a college education can become the cause of stress of parents and students. Reports show that college is getting more expensive with each passing year. According to Forbes, a four-year degree can cost as much as $334,000 at a private college and one year of education at a public college can run an average of $28,000 while private college education is at $59,000 a year.

Students loans which are the most obvious and convenient way to pay for college are costing more too. According to Student Loan Hero, student loans weigh in at $1.4 trillion and there are 44 million students saddled with student loan debt. Most graduate with an average of $37,172 in student loan debt.

If you don’t want to end up with tens of thousands of dollars in debt from student loans before you land your first job, you need a financial that will help you save as much as possible while you’re in college.

Figure Out How Much You Need

Whether you’re a student or a parent wanting to save up for your child’s college education, how much you should save will depend on a few things. Like we said before, college is expensive, but there are ways to add or subtract the national average cost.

There is no set number for much you will need to attend college since each student pays a different amount for their degree. You’ll have to factor in the type school you’ll be attending, whether it’s public or private, whether it’s in-state or out of state, the course load, changing majors, access to grants and scholarships, and your own financial circumstances. At the end of the day, students (or parents) that saved for college will have an easier time paying for it than those who didn’t.

You need to consider your lifestyle too. Are you living with your parents or in a dorm / apartment? Will you have a car payment? Are you eating in the cafeteria or buying groceries? Will you have a part time job? Are you good at managing money?

Your college life will put a big strain on your wallet, but if you do your research and planning, you’ll make getting out from under your student loan debts much easier.

Start Saving Early

Regardless of what college you wish to attend, nothing beats saving as early as possible. Some students are lucky to have parents who set up up a college fund when they were younger, but for those who don’t, you need to figure out how to pay for your college education as early as possible.

With a ~3-5% increase of education costs each year, having a college fund will give you more options and make paying for classes a hell of a lot less stressful.

If you’re a parent planning for your child’s college education several years from now, you should figure out if you want to finance the whole thing or just parts of it. For instance, you might save one-third of the projected cost, let the child shoulder one-third, and one-third goes to student loan financing.

If you’re a soon-to-be college student, you need a full grasp of your financial situation so you can start putting money into your college fund. Think about working part-time during the summer or having your family chip in rather than giving you birthday / holiday gifts.

But the sooner you start saving, the more you’ll have when it’s time to go off to university.

Ways to Save For College

#l: Get a Part-Time Job

In most states, you can start working part-time at age 14 or 15. This should gives you plenty of time to start putting away money for college. Consider working full-time during the summer (if you can find a full-time gig) and part-time when you get to college. Even at minimum wage, you should be able to cover most, if not all, of your tuition costs for the first year at university. This gives you a nice buffer to figure out exactly what you want to do and declare a major the following year.

Some of the part-time jobs you can consider are baby-sitting, dog-walking, tutoring, being a barista, and waitress. Since these jobs are more flexible with time, you can always pick a shift that’s most convenient with your class schedule.

Working part-time also benefits you outside of the obvious financial gains. You’ll build better leadership traits and educate you on budgeting and time management skills that can be incredibly useful during college and throughout your career.

#2: Get a 529 College Savings Plan

Opening a 529 plan for your child is a great way to put savings dedicated to college financing. Basically, the 529 college savings plan is a type of investment that grows over time and you can pull money out of to spend on your child’s college education.

Each state has its own 529 plan with their own fees and operating costs. You can get a “directly sold” plan or “broker sold” plan, but the latter has associated fees due to hiring a financial adviser. Each type has their advantages. You just have to figure out if you can be hands on in managing the plan or not.

The best thing about using a 529 plan for investing for college is that they usually come with tax breaks as the earnings from the investment are not deductible of federal tax.

Another form of 529 plan is the prepaid type. The prepaid 529 plan allows you to purchase tuition credits at the current price point so the price of tuition remains the same as when you bought them and is not affected by inflation.

#3: Apply For Scholarships

Scholarships can do a lot to keep your college costs low. Think of scholarships like free money gifts which you don’t need to pay back. These are unlike student loans that you need to pay off when you graduate.

Don’t think that you need to be in college to start looking for scholarship. In fact, there are a ton of scholarship programs out there that you can apply for while you’re still in high school. Don’t be afraid to shop around for scholarships that may be available based on your outstanding merits. For instance, you can get scholarships for having really good grades, for being an athlete, or for your lineage / demographic.

Don’t stop looking for scholarships when you’re already in college either. Brands, agencies, and even local businesses offer college scholarships to students who are passionate about their projects. This can be a great way to still do what you do best and study with lesser college expenses.

To get you started, visit the school’s website or bulletin board. Sign up for their newsletter to get in the loop for available scholarship grants. You may also want to visit websites like Collegeboard.org and Fastweb.com to find scholarship options.

#4: Tax Free Gifts From Family Members

Friends and family members may want to help with your college fund instead of giving expensive gifts. A good way to approach this is to just tell them that they’re more than welcome to any amount would go a long way.

However, younger kids may still expect gifts during birthdays and holidays. To ensure they keep happy memories, ask guests and families to opt for a cheaper toy (or those that come with happy meals instead) then subtly state that you’d appreciate a contribution the child’s college savings. It’s also important to let your child know that they’re getting money instead of gifts to help reinforce how important it is to go to college.

#5: Buy Savings Bonds For College

Savings bonds may be more popular with older generation, but they’re still a great way to invest for college. The U.S. Treasury offers savings bonds which you can invest into college education while reaping some tax benefits while the money grows. Savings bonds work by letting you take any bond amount between $25 to $10,000. The savings bonds needs to be named after the parents though since you have to be 24 years old to buy bonds.

When it’s time to go to college, you can cash out the bond or transfer it into 529 plan. The bond must only be used to finance college costs like tuition and other fees related to the course, but books and boarding are excluded.

Many people choose savings bonds because the money is kept securely until it’s needed for college. This also keeps your kid from splurging on other things. Additionally, relatives members can purchase additional bonds to further contribute to the college fund.

If you intend to get a savings bond for your child, you need to visit the U.S Treasury’s website www.treasurydirect.gov and purchase a bond.

#6: Take College Classes In High School

Another great way to harness your extra time while in high school is to take some college classes. This might not give a direct savings on your college expenses once you enroll, but taking some of those classes earlier will get them out of the way (and usually on your parents’ dime).

Before you take college classes, it’s best to get with your guidance counselor to see what college classes are right for you. Consider taking your core courses (English, Algebra, and Chemistry) in advance since you’ll need them for credit towards your major. You may even be able to clep these classes if you took them recently in high school. From personal experience, College Algebra and High School Algebra are the same thing. This varies on the college, but the coursework overlaps heavily and if you did well in HS Algebra, you have a good chance of blowing right through College Algebra.

Second, you need to see if these courses are transferable since you may not end up going to the same college. Figure out what college you plan on attending beforehand and check if they credit such courses. The last thing you need is to take college classes in high school and find out they aren’t transferable.

It’ll be more work since you’re still in high school, but you won’t have to take intro-level courses at a full blown university and paying up for them.

#7: Look Into Dual Enrollment

Dual enrollment is pretty much the same as taking college classes in high school. This method allows high school students to take relevant college courses while still in high school, and ultimately, get those courses credited when they graduate.

What happens when you enter into dual enrollment is that you attend a nearby college and take some classes in line with your intended major. This basically lets you earn more college credits than those who don’t dual enroll and helps you finish your degree a lot faster. But beyond the time and savings cost that dual enrollment has to offer, it’s helpful for students that are Undeclared. Dual enrollment offers a glimpse of what college coursework will be like, and help them decide which major is best for them. This helps the student to prevent from changing majors and wasting money of unused college credits.

Dual enrollment can also be a time management crucible. College can be such a demanding phase in one’s academic life. Allowing high school students see what college will be like will at least help them set realistic expectations and prepare for the rigors of college life ahead.

To further save on costs, pick a community college offering dual enrollment on courses that your child may be interested in. As long as those courses can get credited to the college or university the child will go to, the lower tuition costs in the community college certainly pose some savings.

#8: Take AP Classes In High School

You can earn credits, and ultimately save some money, by taking advance placement (AP) classes in high school. AP classes are available in most high schools which let students enroll in advanced classes. Students taking AP classes have to take the AP test at the end of year and when they earn a good score on that test, they’re entitled to some college credits at approved colleges.

While each college has its own policy when it comes to tuition credits, passing AP classes is a smart move in cutting college costs.

AP classes are usually free at most high schools. Check with your school to see what AP classes are offered and try to take multiple classes, but don’t overdo it! AP classes are difficult and can be overwhelming. You might have to spend some money on textbooks and other materials and the cost of taking the exam too, but this can be just the fraction of the actual. In fact, College Board estimates that high school students taking AP classes save around $19,000 when they enter college.

The AP classes will certainly demand of your time and attention, but it will also be great practice to prepare you for college life. You can even use excellent scores on the AP test to further win some scholarship grants, thereby reducing the cost of your college expenses some more.

#9: Federal Work Study Program

The Federal Work Study Program is an interesting choice for students who can work part-time while studying. But unlike working at a business, the work study program places the student in a federal work setting, often on school premises.

What makes this set-up ideal is that the government subsidizes the payment made to the student, so it’s cheaper for the school or college. The student at the receiving end, gets the wage directly, and can then use his earnings to finance some of his college expenses.

There are many advantages in working in a work-study set-up. First, the university or college must provide a work that directly relates to your job. This can be a great training ground for your post-graduate profession. Also, employers must set working hours that are most convenient to your class schedule. Lastly, this gives the opportunity to network with many professionals while earning.

FINAL WORD

The cost of college education is on the rise with each passing year and a college diploma is worth earning despite the overwhelming expense that comes with it.

Getting a college education is incredibly important, but it also takes some planning to make it as easy for you and your child as possible. You need to remember that the sooner you take action and make the investment, the more money you’ll save on your student loans.

College will demand some sacrifices on your time, energy, and finances, but if you map it all out early, you’ll find that graduating from college without a mountain of debt isn’t as hard as some people make it out to be.

SOURCES
http://time.com/money/collection-post/2802161/how-much-save-for-college/
https://www.washingtonpost.com/news/get-there/wp/2014/12/08/the-best-way-to-save-for-college-doesnt-have-to-be-confusing/
http://blog.prepscholar.com/best-way-to-save-for-college
http://www.wikihow.com/Save-For-College
http://money.usnews.com/money/personal-finance/articles/2014/05/20/5-ways-to-save-for-your-childs-college-education
http://www.collegeview.com/articles/article/ways-to-pay-for-college

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