7 Creative Ways to Pay for College
This story about creative financing for college ran over the weekend in my local paper. The article does a great job of outlining some of the financial challenges families are facing in the midst of this country’s economic crisis.
It was good to see that staying in school is still a priority for the two families featured in the piece, but rather heart-wrenching to read the real life stats.
For example, did you know that, across the board, the value of savings in 529 Plans sometimes drops significantly? And the market drops don’t just hit parents who were saving for their kids’ future. It also hits universities and their endowment plans, which are a major source of funding for university-based aid like scholarships and tuition reductions.
The article cites that Harvard University alone lost $8 billion in one recent year. (Bear in mind that Harvard has the largest endowment of any university in the United States — often cited as worth more than the GDP of many developing nations!).
So how are families coping with job loss/possible job loss, slashed college savings plans, and rising tuition rates? Here are some of the ways:
- Downgrading — Students that were considering elite private schools, with $50,000+ yearly costs, are now applying to in-state four-year colleges. Would-be four-year college students are instead applying to local junior colleges.
- Taking out unplanned student or parent loans — Some families with slashed 529 Plans (or other college savings vehicles) are taking out PLUS loans or Stafford loans for the earlier years of college, in the hopes that their 529 account will rebound in time to pay them off.
- Delaying contributions to 401Ks and other retirement plans — Some parents are choosing to put off saving for their own retirement in order to help cash flow their kids’ college education today. This seems like a risky proposition to me. I can certainly see the immediate benefit and appeal (your kid gets to finish school), but the loss of compounded interest means that your nest egg could be taking a serious hit. Of course, given the current state of the market, maybe families feel like the potential (likely?) negative interest rates isn’t worth stopping their child’s education.
- Bulking up on cheaper college credits — If your college lets you transfer in credits, you can take courses at your local community college during the summer for a fraction of the cost. You might also want to consider giving yourself a head start by taking as many AP classes as possible. (Did you know that many universities will give you credit for AP classes?)
- Asking the financial aid office to reconsider your aid award — If you or your parent has recently lost a job, incurred unexpected medical expenses, or experience another financial hardship, you are in a good position to ask your school for more assistance. They might not always be able to help you, but it never hurts to ask.
- Applying for as many private scholarships as you can find — Spending just 5-10 hours a week applying for scholarships can net big results. Even if you only win $500 scholarships, a handful of those can add up to more than half your annual tuition bill. (Check out our weekly Scholarship Announcements posts for an up-to-date list of pending scholarship deadlines.)
- Availing yourself of tax credits — Congress signed new tax legislation in February 2009, which included the American Opportunity tax credit. The new credit increased the tax credit for educational expenses to $2,500, and made it available to families for four years, rather than just two. (See Tax Credits and Deductions for Students for more information about this and other credits.)
Have you found a creative way to finance your or your child’s college education? Tell us about it in the comments section (legal ideas only please ;-)).