The real cost of education

by MyDadBlog on July 16, 2011

in Guest Post

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With college tuition rising every year, it’s a good idea to begin saving for your child’s educational future while he or she is still young. The sooner you begin saving, the less you’ll have to pay out of pocket when the big day arrives and the less debt your child will accumulate by way of student loans.

Younger children are not concerned with the thought of college just yet, let alone the differences between types of higher education institutions.

While it’s possible your child will decide on a community college or technical school, the reality is that a private university’s name may be gracing a bumper sticker on your car someday.

Experts are predicting that by 2021, a four year degree at a public university will run about $95,000. Private universities will cost more than twice that.

The first step is to estimate how much money will be needed for your child’s education. Consider current financial aid possibilities first. Most students will qualify for government aid. These include not only loans, but grants that will not have to be paid back.

Once you make a rough estimate, plan on setting aside money each month. You could consider a regular savings account, preferably one with a higher interest rate, or specialized plans such as a state-operated 529.

A 529 is a special savings plan that allows your money to grow completely tax-free. They are also known as qualified tuition plans and there are two types to choose from.

A pre-paid tuition plan allows you to buy credits or units with participating colleges that go toward future tuition. These plans come with residency requirements and may not work if your child decides to attend elsewhere.

A college savings plan is the second type of 529. These plans allow the account holder to establish the account in the student’s name for the sole purpose of covering college expenses. Investment options are also available with this plan and there are no residency requirements.

If you find yourself without the luxury of starting early, consider all financial aid options wisely. Most student graduate college deep in debt and end up working the next ten or twenty years just to pay down the cost of education.

Last-minute options may include credit cards to pay for books and other college-related expenses prior to financial aid reimbursement. If you have had past problems, there are credit cards for bad credit that can help alleviate the burden.

If you still have a few years before your child graduates high school, compare different savings plans now and get one started as soon as possible.

Even if you can’t afford to put back enough money every month to cover the entire cost of a four-year degree, you can easily save enough to cover book and supply expenses.

If your child has his or her heart set on a public university, talk about the advantages of earning a general associates degree first at a local community or junior college. At a community college, students can complete all general education requirements for minimal costs and still transfer to their universities of choice.

Have your child apply for a credit card and teach him or her how to use it responsibly. While most high school graduates have not built up enough credit to qualify, there are low-balance credit cards for bad credit available.

Even if your child is still an infant, it’s a good idea to start setting aside a certain amount every month. It’s never too soon to start.

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