Finding the money to pay for college can be stressful for both parents and students. Add to this the stress of applying to then choosing a school, most families could use some help to better budget and plan for all the costs of a higher education. Here are some budgeting basics for smart college planning as well as some strategies your students can employ to help bring down the cost.
Understand your financial situation
Sitting down and looking into your finances is step one for parents. The next step is to make a budget based on what you have, re-evaluate your finances to accommodate for college, and look into every possible savings option so the costs don’t overwhelm your other expenses. Parents and students should have a frank conversation about what they can and cannot afford before applying to any schools.
Your student should contribute in some way
There are numerous opportunities for students both before and during college, and these jobs can help pay for school supplies, room and board, textbooks, or rent. Students can even find jobs on campus and apply for scholarships to make building up their savings even easier. Contributing to their own education will also motivate them to do their best in school. And as students pitch in, it teaches them about budgeting and how to handle their finances.
Avoid falling into unnecessary debt
Paying for college is challenging, but that doesn’t mean you should allow yourself to fall into unnecessary debt. Students should never borrow more than their estimated first-year salary after graduation—and parents should not compromise their retirement to pay for college. If you must take out loans, always choose federal over private as the interest rates are lower and there are forbearance and deferment options after graduation.
Find extra work that will provide passive income
With all the added expenses of college, having a side income might be helpful. Numerous jobs could help you supplement your income. If you’re an expert on a subject, you can blog about it or offer paid consultations. You could also teach or do work like graphic design or digital art if you have these skills. Many families these days are finding side hustles online to supplement their primary incomes, helping them avoid that aforementioned college debt.
Look into education-related tax deductions
Consider pursuing educational tax deductions like the American Opportunity Tax Credit (AOTC). It covers up to $2,000 in qualified tuition and fees, plus 25% of the following $2,000 expenses. Parents can claim this credit for all four years of a student’s undergraduate program. Parents can also try the Lifetime Learning Tax Credit, which gives a 20% credit on $10,000 of qualifying expenses. However, if you file as an individual, your income can’t exceed $59,000. Married couples filing jointly must earn no more than $118,000, even if lower credits are available for unmarried individuals earning $69,000 and married couples earning $138,000 per year.
Student strategies to save money on the overall cost of college
The best way to prepare for the high cost of college is to start planning early in high school and continue these strategies as your student begins the admission process. If your teen uses these strategies before they make their final college choice, they should be able to graduate from college with little or no debt, and you should be able to pay for it without borrowing or dipping into your retirement.
- Focus on academics: Students should make it a goal to choose pre-college AP and honors courses and get the best grades possible. If your student does poorly early on in high school, it can be difficult to catch up later. All throughout high school, your student should place a high value on academic progress: committing to studying, preparing for class and tests, seeking help when they need it, and putting academics before any other activity. Charging by credit hour in college adds up. If students enroll in AP classes during high school and earn high scores on the tests, many colleges will award credit for those courses, saving them time and money.
- Take dual-credit courses: Through dual-credit programs, students take college courses simultaneously while attending high school. A student could potentially enter college as a sophomore and graduate sooner with the right courses. Additionally, many high schools offer dual-credit courses at a discounted rate, usually at local community colleges. It doesn’t take a math whiz to figure out that this is a huge savings opportunity for families.
- Apply for outside scholarships: Students should start applying for scholarships as early as possible. There are scholarships available for all ages, so waiting until senior year is a poor decision. Just searching and applying for an hour a day could produce big rewards and help your teen start racking up funds each year to make a huge dent in their tuition bill.
- Choose the colleges with the best financial aid footprint: What does this mean? Look for colleges that offer a high percentage of financial aid—information you can easily find because every college reports these statistics. This will tell you how generous a school is with scholarships and grants as well as the percentage of students who receive aid. Using College Navigator, your student can search with criteria such as location, size, and degree plans or look for a specific school, then compare data of all the colleges they’re interested in.
Parents and students should work together to make college affordable for the whole family. By partnering in this process, you and your teen will both benefit from sharing (and possibly lowering) the cost while contributing to a valuable college education.
Can’t get enough money tips and strategies? There are a lot more where these came from in Our Best Advice to Help You Pay for a College Education.