Paying for college isn’t a one-size-fits-all approach. Every family will have a unique path that leads to the best option, but almost everyone that attends college pieces financing together from multiple sources.
Just like when you invest and should diversify your funds, the same is true of planning for college – don’t put all of your finance sources in one basket. Look at all of your options to choose your family’s best course.
Set up a 529 Savings Plan
In your child’s infant and toddler years, set up a 529 savings plan. Similar to a Roth IRA, you contribute after-tax dollars to your 529 plan. The earnings grow tax-free and if your child attends an accredited college, you can withdraw the funds without incurring a tax liability. Anyone can contribute to your child’s 529 plan and you may get certain state tax deductions if you choose a plan in your state.
In addition to your own savings, tap into the other college financing resources below to maximize your efforts in paying for college.
Exhaust Scholarship Options
There are scholarships out there for many reasons, not just academics and sports. Don’t worry if your child isn’t a ‘straight-A student’ or the starting quarterback. A quick search online for scholarships will turn up hundreds of opportunities. Comb through them as best you can, applying for as many scholarships as possible.
Remember, scholarships are free money. You don’t have to pay the funds back, as long as you meet the criteria the scholarship guidelines require.
Complete the FAFSA
Don’t assume your family makes too much money to get financial aid – apply for it. The Free Application for Federal Student Aid is required for all aid from the government.
Federal student loans, state financial aid, and even school-based options rely on the information you provide in the FAFSA. The application becomes available every year on October 15. The earlier you complete it, the more financial aid opportunities you may have.
Grants are also ‘free money.’ The Department of Education is a valuable resource that can help you find grants from both the federal and state government. Like scholarships, you don’t pay grants back but apply for them early because once the funds run out, the grant ends.
Take a Work-Study Job
If you’ve exhausted all of your options above, consider a work-study job for your child. Many colleges offer certain benefits in exchange for the hours worked. For example, your child may work off tuition, books, or other school-related costs.
The most important factor is the FAFSA. Complete it as early as you can to learn about all of your available options as you may have more than you realize. Even if those options include student loans, completing the FAFSA helps you get the most favorable loan terms based on your need. If you stick with federal and state resources, avoiding private loans, you’ll save the most money while being able to send your child off to a great college.