Afford higher education for your children – and yourself


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Parents want the best for their children, but when it comes to paying for higher education, many feel daunted by rising tuition costs.

In 2008, tuition rose an average of 6.4 percent over the previous year to $6,585 at public in-state institutions, and 5.9 percent to $25,143 at private colleges and universities, according to an October 2008 report by The College Board. Neither of those totals includes housing, which averaged about $8,000 per year.

For many parents, sending children off to college could shift a family from financial stability to a lifetime of debt. Planning early for the cost of education can keep your family from overextending while still allowing you to provide your child with the educational tools necessary for his or her success.

The key to navigating the financial territory of providing for your child’s higher education costs is to explore every available opportunity to lessen the financial burden, from scholarships to life insurance. Here are four tips for getting started:

Start investing now

As with any long-term investment, consistency is critical. Committing even a few dollars a week will ultimately yield a sizeable college fund.

For example, many parents have turned to the 529 investment plan. The 529 is a state-run plan set aside solely for education costs. Earnings from the plan are not taxed when used to pay eligible college expenses. Some states offer matching grants as well as income-tax deductions or credits to participants.

Rules vary from state to state, and you don’t have to open a 529 college-savings plan in your home state, so it’s advisable to shop around. However, fewer investors are opening 529 plans due to concerns about stock market volatility, and those who have them are contributing less. Parents today seem to be seeking more conservative vehicles for their money.

Explore loan options

The two primary sources for loans are private and federal. The credit crisis has made private loans harder to come by, with several lenders closing their doors.

The situation is much better on the federal front. Grants and federal loans for students increased for the 2008-2009 school year by a per-student, post-inflation average of 5.5 percent. Keep track of the viability of both loan sources as your child approaches college age.

Identify “hidden” scholarships

Don’t rely on receiving scholarship money from the college your child plans to attend. Instead, seek oft-overlooked organizations in your community such as the American Legion and the Rotary Club, both of which are longtime supporters of prospective college students.

Your local high school probably has a list of similar organizations. Also, ask your employer about its scholarship or grant program, and ask your spouse to do the same. Many companies – particularly larger ones – have such programs.

Buy life Insurance, or re-evaluate your current policy

With tuitions, fees and room-and-board costs skyrocketing, your current term life-insurance policy may be inadequate as your children approach college age. Even if your children are years away from college, adding coverage now would lock you in at a lower premium rate.

Undoubtedly, higher education will have a positive impact on your children’s future, but you need to consider your own future as well. Paying for their education shouldn’t come at the expense of your financial stability.

Exploring these options will prepare you for the day those acceptance letters come in, whether it’s two or 12 years away.