The price tag to send a child to college has skyrocketed, and
it seems there is no end in sight for the soaring cost of a college education.
According to the College Board, a moderately priced, four-year state college
now costs $22,261 per year. If you want to attend a private university, then
double that figure. Yes, private schools cost $43,289 per year, on average. It
is no wonder student loan debt (which is close to $1 trillion) has recently
surpassed credit card debt for the first time in history.
Before you throw your hands up in the air and tell your
children their post-high school options may include the military, vocational
school or -- heaven forbid -- a job (all viable options for many), there are
ways to save for college.
1. START EARLY
No matter what you earn, set up a college fund for your
children as early as possible. Even if you can only afford modest deposits, the
money will grow and will become substantial by the time your children graduate
high school.
2. OPEN A
SAVINGS ACCOUNT
The college
fund does not have to be a complex investment fund. Simply open a savings
account and set up an automatic funds transfer every month. Even if the monthly
dollar figure is low, at least the account will grow steadily and you will not
have to worry about making the deposits. You can adjust the transfer amount as
your income grows.
3. SET UP A 529 PLAN
Named after IRS revenue code 529, these plans can be set up as a "pre-paid
tuition plan," or a "college savings plan." Pre-paid plans
estimate a specific cost for tuition, fees, books and expenses, based on
current cost levels, and they lock that amount into place. College savings
plans are professionally managed investment portfolios. (One warning with 529
plans ... The IRS prohibits
individuals from utilizing two tax benefits for education on the same education
expenses. Using tax-protected 529 earnings to pay for their child's first
semester of college disqualifies some parents for the American Opportunity Credit, worth up to $2,500. Therefore, do not tap
into your 529 plan until after paying the first $4,000 in qualified education
expenses, such as tuition and textbooks.)
4. BUY
SAVINGS BONDS
The U.S. Treasury offers Series
EE Bonds, guaranteed to double in value after 20 years. Current interest rates
are low, so Series EE Bonds offer a stronger return on investment.
Experts often frown on borrowing money against a
401(k) plan to help fund a child's education. Depending on the rules of your
401(k) plan, taking out a loan against your plan may disqualify you from
company matching funds. In addition, you may have to repay the loan within 60
days of a layoff or if you leave that company.
Of
course, there are several other ways to reduce the massive cost of a college
education. Many students qualify for Pell Grants and student loans. There may
also be scholarship opportunities available for your children.
For
more information on AltaOne's student loan program, visit: http://www.altaone.org/interior.php/pid/2/sid/107
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