The Tools You and Your Family Need to Pay for College
If you're hoping to send your child off to further their education, you might be wondering how you and your family will pay for college. Scholarships, grants, and loans are the typical suggestions for how to accomplish this, but did you know that there are a lot of other financial products that could help? It's best to look over all of your options when determining how your family will cover college costs. Additionally, it's important to include your child in these conversations so that they understand what their responsibilities will be after they graduate.
Education Investment Accounts
The 529 College Savings Plan and the Coverdell Education Savings Account both have "savings" in their title, but they're actually education investment accounts. Money that you put into a 529 Plan or a Coverdell Education Savings Account is invested for education purposes. As these accounts grow, you may withdraw from them tax-free as long as the funds are used for qualified education expenses.
Pre-Paid Tuition Programs
If you look into paying for college, then you probably know that the cost of tuition, room, and board are on the rise every year. What will that cost look like once it's time for your child to enter college?
This is where a prepaid tuition program can help. A prepaid tuition program allows you to lock in today's tuition rates by purchasing units or credits at participating colleges/universities.
Different Types of Education Loans
You and your child can take out various education loans to help pay for college.
Education loan options include Stafford Loans, PLUS Loans, and private student loans. But did you know that you can also use a home equity line of credit (HELOC) to help pay for college? There are pros and cons to doing this, so be sure to look into whether or not this makes sense for your family.
Remind your child that whoever takes out a loan to pay for education — whether it's you or your child – will be the person responsible for paying it back.
Education Savings Tools
There are numerous education savings tools to use when you're trying to save up money for your child's college costs. This may include savings bonds that will increase in value over the years (though perhaps not as quickly as college costs are rising), and saving money in a typical savings account.
While looking through the options above and figuring out how you and your child will pay for college, speak with your financial advisor about how some of these financial products may affect the overall financial aid package offered to your child when the time comes to send them to college. And be sure to take this opportunity to include your child in the process so that they can learn about helpful financial tools and gain a better understanding of what they'll be responsible for after they graduate.