How to Make Paying for College Practical
Anyone who’s thought about going to college or sending a child to college, has probably wondered how to pay for it. Scholarships, grants, and loans are typical suggestions for how to accomplish this, but not every student can gain enough of them to cover full tuition, not to mention housing, food, books and fees. For many families, the best approach is a combination of approaches. Don’t give up on grants, scholarships and loans, but also mix in some special accounts built especially for education spending. Here are a few to consider:
Education Investment Accounts
The 529 College Savings Plan and the Coverdell Education Savings Account both have "savings" in their title, but they're actually education investment accounts. Money that you put into a 529 Plan or a Coverdell Education Savings Account is invested for education purposes. As these accounts grow, you may withdraw from them tax-free as long as the funds are used for qualified education expenses.
Different Types of Education Loans
You and your child can take out various education loans to help pay for college.
Education loan options include Stafford Loans, PLUS Loans, and private student loans. But did you know that you can also use a home equity line of credit (HELOC) to help pay for college? There are pros and cons to doing this, so be sure to look into whether or not this makes sense for your family.
Remind your child that whoever takes out a loan to pay for education — whether it's you or your child – will be the person responsible for paying it back.
Education Savings Tools
There are numerous education savings tools to use when you're trying to save up money for your child's college costs. This may include savings bonds that will increase in value over the years (though perhaps not as quickly as college costs are rising), and saving money in a typical savings account.
While looking through the options above and figuring out how you and your child will pay for college, speak with your financial advisor about how some of these financial products may affect the overall financial aid package offered to your child when the time comes to send them to college. And be sure to take this opportunity to include your child in the process so that they can learn about helpful financial tools and gain a better understanding of what they'll be responsible for after they graduate.