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Paying for a child’s college education when you failed to save enough
Money ManagementMonthly financial advice |
School may be coming to a close in the coming weeks, but parents of school-age children should begin planning now to meet the rising costs of a college education. This is especially critical for parents whose children will be attending college in a year or two.
According to the Maryland Association of CPAs, there are steps you can take to make college education a reality for your child, even when you haven’t saved enough. Here are several strategies.
Treat selecting a college like any other purchasing decision
Most people can’t afford the most expensive house on the block or the latest luxury sedan. Yet when it comes to their children’s education, parents often feel that only the very best will do. The truth is that there are plenty of excellent affordable schools out there; you just need to do your homework.
One option is to have your child attend a less expensive school, such as a community college, for two years and then transfer and earn a degree from his or her top-choice college. The key to making this strategy work is to plan ahead and to make sure the credits are transferable.
Use a tuition payment plan
Which sounds more doable –- an annual lump-sum tuition payment of $15,000 or 10 payments of $1,500? Many schools have contracts with tuition management services that allow you to spread the annual cost of tuition over the course of the year, making eight, 10 or 12 payments. These aren’t considered loans so you pay no interest, although there is typically a small annual enrollment fee. Contact schools your child may be interested in attending and find out their tuition payment options.
Look for free money in the form of grants and scholarships
Grants and scholarships are out there, but they aren’t always easy to find. You should start by checking out individual college Web sites or associations related to your child’s talents or career aspirations.
Don't overlook local sources. The best strategy may be to hunt for multiple small scholarships from local service organizations, such as the Lions Club. Community-based awards may be smaller, but they're also easier to win.
Many large companies provide scholarship funds to the children of employees. Check with your company’s human resources department to see if your employer is one of them.
Another option is to use a reputable scholarship search site such as FastWeb.com or CollegeBoard.com. Be wary of any scholarship search engine that charges a fee; it may be a scam.
Look into student and parent loans
The most common type of student loan is the Stafford loan, a federally guaranteed, low-interest loan. For subsidized Stafford loans, which are awarded based on financial need, the federal government pays the accruing interest while the student is in school. On unsubsidized Stafford loans, accrued interest is paid by the borrower.
Parents may borrow up to the full cost of a student’s education minus any financial aid with a PLUS (Parent Loan for Undergraduate Students) loan. To qualify, the parent must meet the lender’s eligibility requirements.
The Perkins student loan is awarded to students with exceptional financial need. Using a limited pool of federal funds, the school determines the actual awards and may choose to divide limited resources among many eligible students.
How not to pay for college
Resist the temptation to borrow against your house. A home equity loan could put your house at risk and costs only slightly less than borrowing under the federal PLUS program. Most CPAs advise against borrowing from your retirement account to pay tuition. It is better to allow this money to grow and to take advantage of student loans.
Only CPAs are equipped to address your full range of financial needs with integrity and insight. In Maryland, CPAs must pass a rigorous two-day examination, adhere to strict ethical and professional standards, and, beyond college, complete 80 hours of continuing education every two years to be certified by the state — accountants do not.
Your doctor is certified; your lawyer is certified. Make sure your accountant is a certified public accountant.
For CPA referrals in your area, contact the MACPA at (410) 296-6250 or click here.
The Maryland Association of Certified Public Accountants (MACPA) is a statewide professional association that provides leadership, information and services for its nearly 10,000 CPA members, who are employed in private practice, industry, government and education. CPAs are business and financial professionals who have passed a rigorous two-day examination in order to be licensed by the state. CPAs are committed to protecting the public interest, and must adhere to stringent ethical and professional standards and continuing professional education requirements.