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Parents — How to Help Your Children Pay for College

According to the College Board, college has become the second highest expenditure for many families, second only to the purchase of the family home. Recent surveys have determined that most parents greatly underestimate how much their child’s college education will cost.

The average in-state tuition and fees for full-time undergraduate students for 2005-2006 was $6,200 for a public two-year college and $5,206 for a four-year public university. Private four-year schools averaged $16,888 in 2005-06. (Source: National Center for Education Statistics, Higher Education General Information Survey.)

Listed below are some helpful tips and guidelines for parents. In addition to these tips for paying for college there is additional information to help you and your child plan for college. Your financial preparation will be as individual and as unique as your situation. Many financial counselors are available if you choose to take advantage of those services and numerous online resources exist to research your options. This Web site is not a comprehensive planning guide for parents. It is intended as a resource to get you started and provide some tips and free resources that you may overlook.

Tips for Helping Your Child Pay for College

  1. Plan in advance and begin saving as early as possible.

    Be proactive when it comes to paying for college. Get informed by doing research online and learn the rules of the college funding process. Talk to other families, your accountant and/or financial advisor, high school counselors, and college financial aid administrators. Many helpful resources exist for lower income families, but many options are also available for middle income families. Your planning should begin before your child is a junior in high school.

    • Many state governments offer college savings programs. The College Savings Plan Network provides information about the 529 College Savings plans and links from their Web site to the many state plans.
    • If you need help estimating how much you could or should be saving for college, check out the college savings calculator provided online by the Department of Education.
    • Know the true cost. Remember, cost of attendance is not just tuition. It is books, living expenses, tuition, room and board, etc.
    • Learn about and take advantage of tax benefits and prepaid tuition plans. Strategies can be used to create “tax scholarships” and educational IRAs. If you have a tax advisor or a college-funding planner, ask him or her about gifting, shifting current income and using the tax capacity of your child.
  2. Don’t assume you won’t qualify for any type of federal financial aid.

    Two types of financial aid are offered by colleges and universities. Need based takes the parents’ and students’ income and assets into consideration. The second type — merit based — is based on academic achievements and has nothing to do with financial assets. However, before your child is considered for any of these opportunities, you must apply for financial aid.

    Another source of funding is the Federal PLUS Loan program. A PLUS loan from Student Assistance Foundation is a loan taken out by the parent(s) to help pay for their child’s cost of education. Tuition and fees at many colleges often exceed the amount of money students are allowed to borrow under federal loan programs. Parents, however, can borrow up to the cost of attendance with a federal PLUS loan.

  3. Know the financial aid process.

    Most students start applying to colleges their senior year. It is a stressful time and you and your child are going through many changes. You can make this transition and huge financial investment easier if you do your homework and learn about the financial aid process ahead of time. Please take the time now to review our information about The Financial Aid Process. This will introduce you to concepts like FAFSA, Ffderal need-based aid, federal merit-based aid, eligibility criteria, expected family contribution, federal student loans, grants, scholarships and work-study.

    Do your homework and educate yourself so you can help your child through this process. All too often, students have other things on their minds besides paying for college during their senior year. Knowing the financial aid process, rules, regulations and deadlines can help you save thousands of dollars.

    Being prepared, being proactive and getting educated on the financial aid process will help you avoid the sticker shock that hits many parents with that first college bill.