Investing in the Future
One of a parent’s most difficult moments is driving away from college on move-in day, accepting that your child is grown and on to something new. But we know that even though you and your student are not under the same roof all year, a parent’s role in his or her son or daughter’s life is hardly over. They look to you for advice, support, and, let’s face it, financial help. They may not call home every weekend as you’d like, but know that they are appreciative of all you do for them.
Even though your family may qualify for financial aid, chances are that you will be expected to pay some portion of your son or daughter’s tuition and fees.
If you are offered a significant financial aid award, you might only be responsible for the cost of books or living expenses. Or, you might be expected to pay a large portion of tuition. In this case, you have three options: to save in advance, pay as you go, or borrow money and spread your payments over a number of years.
Saving for college is a sound financial decision. In general, the financial aid package is much more strongly influenced by a family’s annual income than by your savings – so that with few exceptions, saving in advance simply makes it easier for you to pay the same fees you’ll be required to pay, whether you have saved or not.
There are many rewards for saving, including tax breaks on the money you save, less dependence on loans to finance the cost of education, and increased financial comfort with your son or daughter’s college decision.
Programs such as Education IRAs, Series EE Savings Bonds, and state savings plans offer tax incentives for college saving. For information on tax-advantaged 529 plans, offered in many states, visit www.savingforcollege.com.
You can use a savings calculator, online at www.finaid.org, to estimate how different monthly savings contributions will grow over time.
In 1997, the U.S. government enacted legislation that provides tax credits to families with students in college, depending on family income. You can find detailed information on the HOPE Scholarship and Lifetime Learning Credit online at www.finaid.org/otheraid/tax.phtml.
FLEXIBLE COLLEGE PAYMENT PLANS
When the time comes to pay college costs, many private colleges offer payment plans – annual, semi-annual, quarterly or monthly – to ease the cash flow burden.
For families with demonstrated need, federally subsidized loans, such as Perkins and Stafford loans, offer deferred payment and waived interest for the period that your child is in college. These will be included as part of your financial aid package. Alternative loans not based on need are available from federal, state and private sources.