I really hope you’re not eating breakfast while you read this. According to a recent blurb issued by the National Center for Education Statistics, the average annual tuition plus expenses for a private non-profit four-year college stacks up to a balking $35,000. At least. Who needs coffee after that snippet, eh?
It gets worse in fact - In a paper produced by Daniel Indiviglio in The Atlantic, the most arresting statistic must be that student loans have accelerated by an almost unbelievable 511% since 1999. And, over the past decade, the costs for college education are galloping at a frightening 6% a year.
If you’re choking on your bagel right about now, or spurting coffee out your nose - don’t say I didn’t warn you.
Now clean yourself up and calm down. Because, whether you’re a student or a parent, here are some ideas to help you fund a college education – so that hopefully, you or your kids can end up with a nicer job, a nicer home, and a nicer life in general.
3 Ideas To Help Grow Your Child’s College Fund Year After Year
Get A Part Time Job – A decent part time job can do more than pay for your iPhone and give you a little extra moolah to splash out on your date every Friday night. Set aside a little towards your college education. If you’re reading this as a parent, why not encourage your kids to save some cash by offering to match their savings. Not only will this help create a healthy college fund pot, but it gets your children into the savings mind set – a very important discipline and life skill indeed.
Set Up A Tax Efficient Savings Plan – Savings are great, but you really need to get the maximum BANG for your college-saving buck. There are a myriad of savings schemes that are available specifically with the intention of helping parents and students pay college fees. There are a few main types available – Taxable Accounts, Education Savings Accounts and 529 Plans.
Taxable accounts are really normal savings accounts where the saver retains full control of the account. However, taxes will need to be paid on interest and capital gains. If you opt for taxable accounts, then look at Uniform Gift To Minors Act (UGMA) and Uniform Transfers To Minors Act (UTMA) as these can significantly cut your tax rate.
529 Plans are possibly the very best way to go for those who are certain their kids will end up in college. They are ruthlessly tax efficient up to $260,000 with one crucial term – and this is key – the money sheltered within a 529 plan must be used towards college expenses. You can’t just blow it on a luxury holiday or a nice new car if your kids decide they’ve changed their mind about college. Penalties are actually quite brutal if the money is not put towards college education – with income tax, an additional 10% federal tax and withdrawal of state credits punching you from all sides.
Financial Aid – For low income families, it should come as a relief that around 1% of the annual federal budget is spent on student financial aid. Roughly, the state forks out $120 billion a year to help students from lower income families achieve their college education goals. It means that many students use a strategic mix of government aid, student loans, parent/relative savings and other (e.g. part time job) income to meet fees.
It may sound difficult. It may sound close to impossible. But, whether you’re reading this as a parent or as a student-to-be, I’ll leave you with this sobering thought. According to the U.S. Census Bureau, employees with a basic college degree earn an average of $1m more in their working lives than their high school diploma holding counterparts. Surely then we’re irresistibly led to the conclusion that a college degree isn’t just preferable if you want the finer things in life. It’s downright essential.
Disclaimer This article is for educational purposes only and should not be considered financial advice remember to always do your own research and consult a professional