Top Tips to Help Tackle the Costs of College

04/14/2021

Top Tips to Help Tackle the Costs of College

One of the biggest hurdles to achieving the goal of a college education is also one of the most common — the cost. 

College tuition has been steadily rising for decades, and associated costs add up quickly, including fees, room and board, books and general cost-of-living expenses. But you don’t have to be intimidated.

Whether you’re just getting started with your college savings and have time on your side, or you’ve been setting money aside for years, you can overcome the financing that stands between you and the expanded opportunities higher education can bring.

United Bank recognizes that personal finance is personal, and that there’s no one-size-fits-all solution. Here’s some common solutions and resources for paying tuition, so you can start your college savings plan sooner rather than later. 

Seek Out Scholarships 

Individual colleges offer various scholarships for students who attend their schools. But beyond those, there are thousands of scholarships available nationwide to students who excel in academics, athletics and extracurricular activities. 

All together, these scholarships award billions of dollars for college expenses annually, and this is essentially “free money” offered to students in that it never has to be paid back. Two good resources for tracking down scholarships and their eligibility requirements are the College Board’s Scholarship Search (brought to you by the nonprofit behind the SAT standardized test for college admissions) and Sallie Mae’s Scholarship Search tool. (Originally set up as a government entity charged with servicing federal education loans, Sallie Mae is now a private company that still serves as the nation’s largest student-loan originator.) 

And don’t forget to check with local civic organizations that may offer scholarships. Examples in your community include the Rotary, Kiwanis, Lions and American Legion Clubs.

529 Savings

One option for college savings that has grown more popular in recent years is the 529 plan.
A 529 is a specialized savings account specifically designed to help save money to pay for college, and in a way that is tax-advantaged for you. Benefits include tax-deferred growth, tax deductions and tax-free withdrawals for money used to cover qualified tuition and educational expenses. 
Though there are a variety of 529 plans, opening a 529 account is relatively straightforward. The main differentiator you need to choose is between a savings or prepaid plan. Savings plans act more like a 401(k) in that they participate in securities, bonds and stocks. A prepaid plan is more like a pension, growing at a guaranteed rate, but with more limitations, such as which states the plan applies to and what the money can be used for.

Technically, the account owner (the one who controls the investments) and the beneficiary (the one who benefits from the money) can be the same person, but 529 accounts are most often opened by a parent or grandparent with the intention of a family member using the money when they go to college.

Whether your 529 plan is for you or a family member, United Brokerage Services, Inc. can help you with putting together the right college savings strategy for your specific needs. Our Financial Advisors are here to assist.

Investing

Whether or not you choose to invest college tuition money depends on your family’s timeline. If you’re sending a child to college this year, planning on fast, significant investment growth is unrealistic. 

However, if you have a longer period of time before the money will be needed for tuition, investing could be worthy of consideration. Investing is never a bad choice, and you can always use the money long after the graduation caps have been tossed. 

United Brokerage Services, Inc. offers a variety of investment options ranging from managed asset plans and 401(k) accounts to mutual funds and municipal bonds. Working with a United Bank Financial Advisor who understands your needs can get you on the best path toward achieving your college financing goals.

Payment Plans Through Your School’s Financial Aid Office

Your college of choice likely has a wide range of payment options available.

In addition to merit-based and financial need-based scholarships, most colleges get creative with financing plans. Some plans include prepayment of four years' tuition — the idea being that you pay a lower amount at the current price, without worrying about rising tuition costs. 

Many colleges also have monthly payment plans, where the semesters’ costs are evenly distributed across 12 months — a choice that helps keep payments consistent without having to pay too much at once out of pocket.

Note that with some monthly payment plans, colleges typically charge an additional fee, so be on the lookout for any upcharges.
Deferred payment plans are also an option offered through many schools. These payment plans give you the option to delay payments until schooling is completed, without accruing interest on the loan in the meantime. 

The details of these plans vary, so it’s important to ask specific questions at your specific school or financial aid office to help you understand the terms of your agreement.

Apply for Student Loans 

Student loans offer college students access to the money they need to pursue their degrees, typically with substantially lower interest rates than those available for typical consumer loans. Often times, the payback requirements for these types of loans are deferred until after the student has completed school. 

Student loans are intended to bridge the gap between scholarships, financial aid and the amount of tuition you can pay out of pocket.

In the U.S., there are two primary types of student loans — U.S. government-sponsored federal loans, and private student loans, which are offered by private-sector financial institutions. Because they typically offer much lower interest rates and defer interest charges and payment requirements, federal loans are generally a much more appealing option for students than private loans. A great place to start your search for federal student loans is the studentaid.gov website administered by the U.S. Department of Education.

Roughly 70% of students graduate with student loan debt, indicating how simply necessary they are for many. Before taking on any student loan, make sure you’re clear on when your payments are due, what the minimum payment is, when you can refinance to get a lower interest rate, and the interest rate you’re working with.

Start a College Savings Account

Perhaps the most traditional way to cover college tuition and other higher education-related expenses is to open a savings account dedicated specifically to your college savings goals. The best strategy is simply to start saving as soon as possible by making regular (and realistic) contributions as often as you can. 

An especially smart saving practice is to regularly deposit financial windfalls, such as tax returns and bonuses.

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