The Top 5 Ways to Finance Your Future at College
Whether you’re a parent or a recent high school graduate, the rising cost of college - especially in light of recent economic turmoil - is no small concern. It’s no secret college is expensive, and now paying for college isn't either! Our finance experts came up with "The Top 5 Ways to Finance Your Future at College."
It’s never too late to start saving. The sooner you begin saving, the less taxing it will be on your budget, and the more you can take advantage of interest rates working in your favor.
Another key aspect to saving is deciding where you want to save your money. One popular option is a tax-advantaged 529 savings plan. While this is available in all fifty states, each state has different requirements and benefits. Additionally, a 529 is an investment account and therefore requires management. As an investment account, a 529 is exposed to losses as well as gains.
Another option that does not incur maintenance fees and is not exposed to losses like a 529 plan is a Money Market Account. Money Market Accounts can be insured and secured, unlike other investments, are specifically designed for a high-yield investment and often returns superior interest rates.
2. Fill Out That FAFSA!
The Free Application for Federal Student Aid (FAFSA) is the starting point for most financial aid programs – government-run and otherwise. This application will not only determine if you are eligible for federal aid but also will be sent to your future educational institution to determine additional aid. According to a recent study, an estimated $46 billion in grants and scholarship money is awarded each year by the U.S. Department of Education and the nation’s colleges and universities.
3. Apply for Scholarships
Scholarships can contribute a significant portion to financing your education but you should plan ahead. Applying for scholarships can take some time, and each has varying deadlines. Though they take some time, there are plenty of them out there for the taking! According to the same study cited above, there is an estimated $3.3 Billion given in gift aid by private sources. Not sure where to begin looking? Check out scholarships.com.
4. Take Out a Loan
If you’ve gone through all of the steps for getting aid and scholarships, you may still be left with a significant amount of tuition to pay. In fact, according to a recent study, most students and their parents pay nearly half of college costs out of pocket. So, what do you do if you don’t have roughly $27K lying around? You can get a student loan through the federal government or a private lender.
There are a few advantages of federal student loans; some federal student loans offer income-driven repayment plans and even allow the borrower to change their repayment plan. Additionally, depending on what type of federal loan it is, you may have the option of taking out the loan without a credit check.
Depending on your credit score, private loans can often have lower interest rates, provide different repayment plans, and are more flexible in the terms of the loan requirements. Are you interested in a private student loan? Contact us or email our loan department directly to talk more about what your options are.
5. Take Advantage of Tax Breaks
Last but not least, once you have paid for tuition, make sure to take advantage of tax credits that can put some of that money back in your pocket.
Federal tax credits available for parents of students is The American Opportunity Tax Credit (AOTC) and Lifetime Learning Credit, both of which are dollar-for-dollar reeducations on the taxes you owe.
A tax deduction available for student loan payments is the student loan interest deduction, which allows you to write off up to $2,500 of student loan interest payments from your taxable income.
For a complete list of tax advantages, visit the IRS Publication 970, Tax Benefits for Education.
Do you still have questions about financing your future? Have no fear; we’re here to answer your questions, contact us today!