It’s that time of the year again when parents are faced with the monumentous task of paying their kids’ college tuition. Regardless of whether it’s their first time or they’ve been paying tuition fees for a while now, sourcing funds for education presents a unique challenge that millions of families all around the United States have to tackle.
Going by the Sallie Mae 2018-19 academic year report, $26,226 was the average amount spent on tuition. Of this amount, family income and savings covered 43%, grants and scholarships took care of 31%, while loans covered 24%. The remaining 2%, according to the report, was covered by family and friends.
Plan Ahead of Time
As a parent, you are responsible for your kid’s education
As a parent, you bear a certain responsibility to your child when it comes to their education, so it’s only best that you plan ahead of time. As is the case when you’re intending to undertake anything, there are several guidelines to follow, and paying for college isn’t any different.
Truth be told, many parents struggle with whether to save for retirement or pay for their child’s college. Striking a balance may be a daunting task, but financial experts advise that the parent should save for their retirement first.
You should save for retirement first
Why, you ask? Because whereas there are a number of options for tuition funds, they don’t exist for retirement savings. So if you’re torn between the two, save for your retirement first, then focus on scholarships, grants, or loans that will cover your child’s college tuition.
Most institutions have actually invested in grants and scholarships, making this an easier route to take. Rockhurst University, for example, has an annual $30 million grant and scholarship investment for its students. Factoring in its population, the amount translates to around $10,000 per student, and that’s before you’ve even thought of sourcing funding from elsewhere.
Where huge finances are concerned, your savings play a crucial role. As such, it is vital that you start putting aside some money for college as early as you can. Don’t procrastinate, don’t find a way to wiggle yourself out of it, just do it. You have your child’s best interests at heart, don’t you?
And saving tools exist, such as the 529 Plan which ensures that tuition money is distinctly separate from retirement funds and emergency savings. All the same, don’t go into it blindly. Make sure to monitor your own growth to determine how much you are able and willing to contribute to your child’s future.
FAFSA
You must have heard of the Free Application for Federal Student Aid (FAFSA), right? Then why haven’t you filed your papers yet? As Sallie Mae revealed in their latest report, most American families undermine their eligibility with 1 in 4 not bothering to apply.
Of these, 39% think that they are ineligible for it, 29% miss the application deadline, while 27% are either misinformed, have no time to apply, or feel that the application process is overly complicated. But, if the effort goes into paying for college, why wouldn’t you follow through to the end?
A Parent Plus loan could come in very handy
Nonetheless, taking out a federal loan is also an option. Parents of dependent students are eligible for student loans, thanks to the Parent-Plus program. Dependent on your financial status, you have the option of borrowing the entirety of the college fee, minus the funds you’ve acquired from other sources.
