Money Health

Saving For College? What You Need to Know

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It’s no secret that student loan debt is at an all-time high. According to Experian, the total amount of outstanding student loans in 2019 is $1.41 trillion. If you’re a parent of a child who is nearing college age, you may be wondering how you can pay for as much of their tuition as possible so you can reduce the amount of loans they’ll have to take. To help, we’ve put together some tips on how to do just that:  

Choose an In-State School

An in-state school will almost always be less expensive than an out-of-state school. For example, if you live in Michigan and your child attends University of Michigan, their tuition will be $15,558 per year. On the other hand, if you live in California and your child chooses the same school, they’ll have to dish out $51,200.

Fortunately, the Western Undergraduate Exchange (WUE) caps out-of-state tuition for students in member colleges. It ensures that out-of-state students pay no more than 150% of in-state tuition at participating schools. Therefore, if your child does want to go to college out-of-state, it’s a good idea to make sure the school they choose is covered under WUE.

Start at a Community College

Community colleges are far more affordable than four-year colleges and universities. So, you may want to encourage your child to start at a community college and eventually transfer to the college or university of their choice.

Community college provides an extra benefit if your child wants to attend an out-of-state university. Going to a community college in that same state would give them the opportunity to gain residency there so they could qualify for in-state tuition when they transfer to their desired university.

Apply for Scholarships, Grants, and Tuition Waivers

While applying for scholarships, grants, and tuition waivers takes time and effort, it almost always pays off. Keep in mind that less well-known schools may give better financial aid packages to attract good students. Suggest that your child stay away from expensive name-brand schools unless they can land scholarships for most of the cost.

Look for Jobs That Offer Tuition Reimbursement

Some companies reimburse their employees for attending college. If you believe your child can juggle a job and college at the same time, encourage them to do some research and find jobs that offer partial or full tuition reimbursement.

Start a 529 Savings Account

Although it’s better to start a 529 college savings account when your child is young, there are still benefits to starting one when your child is older. Not only do 529 plans come with federal tax-free growth and withdrawals for education-related expenses, your state may also offer a partial or full tax deduction.

As you explore these options, consider involving your child. Making them a part of this phase of their college education should help reinforce how valuable it is, and could help them learn important financial skills. That way, if they end up taking on some student loans, they’ll be all the more prepared to handle them successfully.

Anna Baluch is a freelance writer who enjoys writing about all personal finance topics. She’s particularly interested in mortgages, retirement, insurance, and investing.