It’s a common misconception that only wealthy families can afford to send their children to college. In reality, there are many ways to prepare for your child’s college fees, despite the hefty fees. Here are some things you need to know about college and how you can prepare for it.
The United States is highly educated; about 37% of the population graduate with a college degree. However, the cost of college is becoming increasingly expensive. In the last 30 years, the cost of tuition and fees have more than tripled after adjusting for inflation. In 2020-21, the average cost of tuition and fees for private colleges was $35,000 per year. For public colleges, the price averaged $9,410 for in-state students and $23,893 for out-of-state students.
This can be problematic for families who want to send their children to college. However, if you prepare early enough, you can save up for your child’s college education. Here are some options.
Start Saving Early
The earlier you start saving for college, the better. Even if you only have a few hundred dollars saved up, it’s a start. There are various accounts you can open for this. You can start with a 529 savings plan.
529 Savings Plan
A 529 savings plan is a tax-advantaged investment account for parents who want to save for their children’s college fees. 529 plans, named after Section 529 of the Internal Revenue Code, are sponsored by many government agencies.
High-yield Savings Account
A high-yield savings account is a type of savings account that gives you a higher interest rate than a standard savings account. This account is FDIC insured, just like a regular savings account, but typically has fewer fees and a higher annual percentage yield (APY).
Saving early can significantly help you in the long run. Not only will you have more time to save, but you’ll also be able to take advantage of compounding interest.
Get Good grades
One way to reduce the cost of college fees for your child is to motivate them to get good grades. Many colleges offer merit-based scholarships to students with high GPAs. These scholarships can cover tuition, fees, and other expenses. Some of the best scholarships can be found as full-tuition awards.
In addition, good grades can also lead to your child getting into a better college. This means they’ll likely get a higher starting salary after graduation, which can help you repay any loans you took to pay for their education.
Take Advantage of Financial Aid
Financial aid is any form of funding that helps students pay for their education. It can come from grants, loans, or work-study programs. Grants and scholarships are typically need-based, while loans have to be repaid with interest.
Work-study is a program that allows students to work part-time to earn money to help pay for their education. Students who participate in work-study typically work in jobs related to their field of study.
Many different types of financial aid are available, so it’s essential to do your research. You can also talk to your child’s guidance counselor or the financial aid office at their college for more information.
Look Into Tax Credits and Deductions
A few tax credits and deductions can help offset the cost of college. For example, the American Opportunity Tax Credit gives up to $2,500 per year for every student. In addition, the Lifetime Learning Credit provides up to $2,000 annually for each eligible student.
You can also deduct up to $4,000 from your taxable income if you paid tuition and fees for yourself, your spouse, or a dependent.
You can always refinance your mortgage if you cannot fully fund your child’s education with savings and financial aid.
Refinancing is one of the best ways to take advantage of loans. It can help you secure a lower interest rate, saving you money over time.
It’s important to remember that refinancing comes with some risks. For example, if you extend the term of your loan, you’ll pay more in interest over the life of the loan. You should also consider the impact of refinancing on your credit score. If you have good credit, you may be able to qualify for a better rate when you refinance. However, refinancing could result in a higher interest rate if you have bad credit. If you want to get some help with the refinancing process, a professional can help you out. A local mortgage lender can help guide you through the process and ensure you get the best possible deal. They can also help you get the best deal from your refinanced mortgage.
These are just a few ways to prepare for your child’s college fees. Save early and use your previous loans if you can’t fund your education with savings and financial aid. By doing these things, your child shouldn’t worry about their college fees in the future.