It might be the middle of July, but if you’ve got a son or daughter heading to college this fall, you’ve probably already made that first tuition payment. And another one will be due before you know it.
It’s no secret that paying for college these days is a huge endeavor. Many public colleges in South Carolina cost almost $20,000 a year and that’s just for tuition, fees, room and board.
According to the College Savings Plans Network, the parents of a 6-year-old could need $141,950 to send that child to an in-state public college at age 18. A private university could cost even more – up to $332,510. You can’t start saving too soon.
There are many tools you can use, such as a state-sponsored 529 investment plan or Coverdell Education Savings Account. In addition, there are several tax breaks you can take advantage of like the American Opportunity Tax Credit (available through 2012) and the Lifetime Learning Tax Credit. Check with your financial advisor to develop a plan.
In the meantime, experts will tell you that saving for your retirement should take precedence over saving for a child’s college education. Also, you might not need to save the entire amount.
That’s because students can draw from a many places to pay for college – grants, scholarships and loans – for example – and you only have one source for your retirement: you.
Here’s how a student can save on the overall cost:
- Take and pass the exam for as many Advanced Placement courses in high school as possible, thus eliminating college classes to be paid for later.
- Finish in three years.
- Look for federal loan programs that will forgive all or part of the loan. Several programs apply to teachers, nurses and lawyer who work in low-income areas for a certain number of years.
If you haven’t had the money talk with your child, now is a good time. In fact, you might need to discuss it several times. Even if you foot the entire bill, he or she will be managing much of the finances on their own.
They need to make a budget for all expenses, including tuition, fees, room and board, telephone, transportation – around town and for getting home – insurance, computer, books and entertainment.
Encourage them to keep a log of all their spending in the first two months, including every latte and pencil. It’s a great way to discover unnecessary spending.
If they’re getting a credit card, keep the limit low and spend only 30 percent or else they’ll risk hurting their credit score. Remind your student that the college years can be a critical time for establishing their credit score. They’ll need a good one when they graduate, especially when they need an apartment and car.
Those four years will go by in a hurry and sticking to a budget will be important. Your student won’t want a lot of debt to go with that diploma.
Jennifer Panther is a certified financial counselor.
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