No matter how old your child is, you should be thinking about how to pay for college – now. The rising costs of a college education can wreak havoc on students and families, so it’s important to plan ahead. Here are 6 tips to help keep costs down.
1. Set up a gift of college: Does the number 529 ring a bell? Most parents have at least heard of these digits, but fewer than 20 percent of college-bound students take advantage of the tax savings. You might want to re-visit the option, though, because recent changes make it easier for relatives and friends to help build your kid’s college fund.
“529 accounts were set up by the federal government to encourage saving for college as early as possible,” says Craig Westman, vice chancellor for enrollment management at Rutgers University-Camden.
The money deposited, after taxes, is invested and grows tax free. It’s also tax free to take out when used for eligible education costs, including tuition and fees, housing, meals and books.
In the past, gifting was a headache because donors had to request the recipient’s account information to transfer money. Now money can be sent by check to almost any 529 plan simply by listing the student’s name and 529 account on the paper slips. And many 529 plans allow online contributions.
2. Shop around for loans: While many families worry about student loans, they aren’t necessarily a bad thing, says Westman. They give students the financial cushion necessary to take academics and career goals seriously and graduate in four years.
“At Rutgers Camden, we have students, many of them the first in their family to go to college, who try to avoid loans by going to school a semester, then taking off a semester to work to make ends meet,” he says, noting that after a few cycles, many drop out.
Uncle Sam offers two types of loans: subsidized and unsubsidized. Subsidized loans, awarded based on financial need, are considered most favorable, explains Westman, because the feds pay the interest while the student is in school. For example, if a student takes a $10,000 subsidized loans as a freshman, four years later, the loan balance will still be $10,000 because the government picked up the interest costs.
With an unsubsidized loan, students are on the hook for paying accrued interest when they’re out of school. But there are benefits. You don’t have to prove financial hardship to qualify, and the amount that can be borrowed tends to be larger.
3. Get the government to pay back your loan: If your child opts for a career in public service, teaching, health care or other designated field, they may be eligible for a student loan forgiveness program. Such programs typically require employees to stay in their field for a set number of years and to be making contributions towards loan repayment. But over time, often in 10 years, the federal government takes over the loan.
“A lot of families don’t know about this because they’re only looking for financial help at the front-end of college and they’re loan adverse, especially in higher-income brackets,” says Westman, noting that many new Rutgers employees starting careers in higher ed take advantage of these loans.
4. Go for outside-the-box scholarships: In addition to merit-based aid and scholarship opportunities known in local communities, thousands of extra dollars for college can be found with a little effort and a good online search. Westman recommends FastWeb, a free and user-friendly site that also matches students with internship opportunities and provides sound advice on colleges.
“We’ve had students that, between what their parents saved, what money they got from federal, state and institutional aid and the scholarships they’ve found on Fastweb, they’ve paid for college entirely,” says Westman.
But be aware of scams. Predatory companies target students and their families with offers that require payments upfront. The Federal Trade Commission has logged an increase in reported scams recently.
5. Earn college credits in high school: Students can still place out of lower-level college courses by acing harder high school offerings like Advanced Placement courses. Many high schools also team up with colleges to offer students dual credit classes. In Camden County, for example, most high schools offer AP and Honors classes in partnership with Camden County College. For $150 per course, students receive college credits for successful completion.
“It’s not a majority by any means but we do have students who come in with around 30 college credits and could potentially graduate in three years to minimize costs,” says Soumitra Ghosh, Rowan University’s assistant vice president for student recruitment.
6. Get paid for good grades in high school: Rowan is one of more than 250 schools across the country that participates in RaiseMe, which rewards high school students for achievements like good grades and campus visits – with cash. Colleges foot the bill for the scholarships (which are awarded if the student is admitted). It’s free for students.
“We reward students for various things they’re supposed to be doing anyway, such as taking AP classes and participating in community service projects starting their freshman year,” says Ghosh. “When they start at Rowan, they can have up to $6,000 waiting for them.”
