Lessons on Paying for College
The Wall Street Journal had a great article this weekend on Lessons on Paying for College. Most of the time, couples making over $100,000 per year a not eligible for financial aid packages due to their high level of income. However, recently this general rule of thumb has been changing. College costs have gone up so quickly that making a $100,000 per year is really not enough to ensure that you will be able to save enough to pay for you child's college education. Especially if you are considering sending your child to a pricey private school, which can approach $50,000 per year.
As a result of this the private schools are increasing the availability of financial aid to families earning higher incomes. For example, John Hopkins has 25% of freshman familes getting need based aid that earn more than $120,000 per year and 13% were above $150,000 per year. This aid can include low interest loans, campus jobs, and grants that families don't have to pay back. This trend however is not as prevalant at state universities. If you are making over six figures it maybe difficult for your child to qualify for any need based financial aid. The difference is that the average cost for undergrad tuition, fees, room and board at four year public schools is $12,127 per year vs. $29,026 for a private school. This level of tuition is more in reach with a family making six figures.
Tips on paying for your kids college: Here are some of the tips suggested in the article.
- Send applications to a lot of schools to determine if you can get any financial aid.
- Consider hiring a pro to help you with the aid forms and in your search for financial aid.
- Start saving for your kids college education early. My wife and I started mutual funds for our kids the month that they were born. Most mutual fund companies will let you setup an automatic monthly deposit as low as $50 per month. Not sure what college might cost 12 to 18 years from now, try the College Costs Calculator.
- Get start looking for financial aid early. Looking for financial aid needs to start early consider starting you search during the first or second year of high school.
- Additionally, you need to also consider saving in a 529 plan which allows you child's savings to grow and be withdrawn tax free for paying for higher education.
- Also you could consider a prepaid tuition program that is available in some states. One of the drawbacks of this you are limited on the number of schools that you can attend. Make sure before you signup for a prepaid program that you understand the rules of the program.
- U.S. Saving bonds should also be considered since the interest on a savings bond if used for paying for higher is tax free.
- Saving for college
- Consider U.S. government I bonds for college savings
- Comparing a 15 year mortgage to a 30 year
- Paying off your credit cards
- Control your spending with a family budget
- Home based businesses
- Investing In Mutual Funds
- Get Rich Quick
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