Paying for College

Family Savings & Income

Today, every family that sends a child to college will likely have to pay something (however large or small the amount) out of their own pockets to make the college dream a reality. Even though there are many sources of financial aid available to help students with financial need the fact remains that financial aid alone will not meet 100% of college costs for the majority of students. As such, it is extremely important that you understand the financial aid for which you may be eligible, file all necessary financial aid paperwork in a timely fashion, and begin to consider the role of scholarships, loans, work study and your own resources to make up the difference.

In terms of what my work best for your family, keep the following general guidelines in mind:

• Establish expectations for the student and the parents involved. Often parents feel their students should have some financial investment in their college educations. In some cases, a Federal Work Study job and/or student loans appearing in a student's financial aid award can be significant contributions on the part of the student. Whatever your family agrees upon, make sure the expectations are clear. You should also discuss the role of the non-custodial parent in divorce situations. (Note: The financial aid regulations specify which biological parent's information is used in determining eligibility for financial aid. It is the family's responsibility to sort through the contributions (if any) to be made by the non-reported parent.)
  
  
• Figure out what you can reasonably contribute from current earnings and any available savings, versus what you may need to borrow to meet your Expected Family Contribution (EFC). Be sure to explore the various payment options available at the colleges your student is considering. Most now offer extended payment plans throughout the academic year – sometimes even beyond. If borrowing through the federal PLUS loan program or another parent loan program (Click here for more information on loans.) is likely to be necessary, be sure to shop around for the best rates, lowest fees and desired service options. There are many educational loan providers out there today!
  
  
• If you have the chance to put some money away for college ahead of time, be sure to save wisely. Keep in mind that even putting a few dollars away each month adds up over the years. The earlier you start the better. (Click here to find out just how much those savings can grow over time.) Remember, however, there are differences in the federal formula for financial aid when it comes to the treatment of student assets vs. parent assets, and therefore how you save can have an impact on financial aid eligibility. (Click here for more on how you save and its impact on financial aid eligibility.)
  
  For more on common college savings vehicles, click here to view a summary chart with more information on various types of accounts.
  
  
• Remember to take advantage of breaks in the tax code when you do have to pay expenses out of pocket. Many provisions have been written into the tax code in recent years to make life easier for families paying for college. If you have to pay some college costs out of your own pocket, be sure to talk to your tax preparer and/or check the tax filing instructions to see if you qualify for any of the education credits or deductions currently available.
  For more information on the tax breaks currently available under the federal tax code, click here.