Paying for College When You Don’t Qualify for Help
Paying for college is a challenge. While this statement is probably not news to anyone, we sometimes overlook the extent to which this challenge affects all income groups. Whether rich, poor, or someplace in between, most people spend most of what they earn. Few of us can create an annual check for $60, 000 with no breaking a sweat (or, perhaps, suffering a complete panic attack). As a University Coach financial aid expert, I work together with families of all income levels fighting the prospect of paying for college. While students from lower income households often qualify for need-based financial aid , the assistance options for higher income family members are more limited. But that doesn’t mean they are nonexistent. Families can employ a amount of strategies and utilize a wide range of sources to help pay for college when they don’t qualify for financial aid.
Ways of Help Pay for College
- Saving: Saving is perhaps an evident strategy for tackling that college bill, but , according to a recent Sallie Mae study , only about half of all parents of children below age 18 are saving for his or her kids’ educations. Higher revenue families may be positioned particularly nicely to save good sums of money just for college, but even small amounts ended up saving consistently can put a big drop in that college bill, particularly if you make use of a 529 Financial savings Plan , where earnings of the account grow tax-free as long as withdrawals are made for qualified college expenditures. Some states even provide state tax incentives for adding to a 529 Plan, reducing the family’s income tax burden and clearing up more money to pay for college.
- Scholarships: Even if you can afford to pay for full price for college (by your own personal estimation, or simply by the colleges’ calculation, with which you may wholeheartedly disagree), who have wouldn’t like to get a discount? With the exception of the most highly selective schools, recruitment aid, such as academic and athletic scholarships, is available. At the majority of colleges, this type of aid is generally awarded without regard to a family’s ability to pay (i. e. can be obtained to rich and poor students alike). Identifying schools exactly where your child is well above average academically, or where she stands out in certain other way from that college’s typical student, is the best strategy for increasing scholarship offers. You can also go after private scholarships found within your local community or even online at websites such as www.scholarships.com .
- Payment Plans: By default, most schools will bill you twice the year—once for the fall semester and when for the spring semester. Coming up with a full semester’s payment all at once can be difficult, even for families with relatively high incomes. If you can pay for to devote a fraction of the monthly disposable income toward educational costs, you should consider enrolling in the college’s payment per month plan. Most colleges provide such a plan to students, allowing them to stretch out payments out over the course of 10 a few months or a year. There is generally a small service fee to sign up (maybe $50), but this fee is minimal compared to interest payments on a loan (or interest you may be accruing on your assets), so if a transaction plan helps a family avoid asking for (or liquidating high-return assets), it is well worth considering.
- Loans: And speaking of loans, they are used by families at all income levels to help pay for college. Even parents who could afford to pay for college out-of-pocket will sometimes choose to create student loans part of their college transaction strategy in order to avoid asset liquidation or give their child some responsibility for his or her own education. Some parents even agree to pay off their child’s loans for them should the student keep a certain grade point average, graduate on time, etc . When asking for, be sure to carefully consider all mortgage terms, as well as relevant gift tax implications for paying off a child’s loans.
- Tax Breaks: Finally, families who do not qualify for financial aid may still access government assistance through education tax fractures. Though not available to the wealthiest parents, the American Opportunity Tax Credit can be claimed by parents creating to $180, 000 annually plus paying the college tuition of their undergrad child. Higher income family members may be able to structure their finances in a manner that allows their child to claim this particular credit for themselves. Furthermore, as previously mentioned, families at all revenue levels can take advantage of tax-free resource accumulation by investing in a 529 University Savings Plan.
Which Strategy Should I Choose?
While a high income is certainly a resource that is helpful in controlling college costs, income alone doesn’t always ease the burden of college payments–even relatively well-off families are often challenged. Higher income families, while precluded from accessing need-based financial assistance, are not without options for paying that college bill. Many families—rich or poor—should explore the above resources when developing a college transaction plan. A little strategic considering can go a long way toward maximizing money and minimizing college payment tension, no matter what your income level.