Help My Child Pay for College

8/14/2019 Help My Child Pay for College

1/17

Help My Child Pay for

College

Understanding College StudentFinancial Aid

Compiled by:


2/17

Table of Contents

Know How Much to Save for College

Set Aside Twenty-five Dollars a Month for College

Choose a Tax-free College Savings Account

Choose the Right Student Loans for College

Ace the FAFSA

The Real Cost of College

Community Service Ideas That Help Students Pay College Expenses

How Much Do You Know about Saving Money for College?

www.EduGuide2 ONLINE EDUGUIDE


3/17

Help My Child Pay for CollegeUnderstanding College Student Financial Aid

Do I need this EduGuide?

Yes, if you have kids who will be attending college, whether in thirteen years or three, this EduGuide will help you learn more aboutfinancing their college education by saving money for college, finding free college money through scholarships and other financial aid

for students, and making smart decisions about student loans for college.

How does it work?

l Quizzes help you know where you stand.

l Articles give you the background information you need to make a decision.

l ShortCuts help you take immediate action. Choose one or go through them all.

What will I learn from this EduGuide?

l What college savings plans are and how they work

l How to determine how much you need to save for your childs college education

l What information you need to complete the FAFSA

l How even small savings can add up over time

l Why college may be more affordable than you think

Quick Solutions

l What can I do in 15 minutes? Have a family meeting and brainstorm ways to set aside twenty-five dollars a month toward

college. Review the pros and cons of various tax free college savings accounts.

l What can I do in one hour? Talk with your child about how you and he can pay for his college education, reviewing your optionsfor loans, scholarships, and other financial aid opportunities.



4/17

Know How Much to Save for CollegeUse a College Savings Calculator

If youre not sure what kind of financial goals to set to fund your childs college education, a college saving calculator, such as this one

on the TIAA-CREF Web site, can help as you think about saving money for college.

Information Youll Need before You Start

l Cost of tuition for one year of college today : If youre not sure where your child might go to school, simply pick a public four-

year college in your state and check its Web site for its annual tuition.

l Tuition inflation rate: This calculator sets a default rate of six percent. Depending on the school, the area of the country, and

the current economy, this figure could be between two and eight percent.l Years to save before college: Assume your child will start college at eighteen, and subtract his or her current age to arrive at

this number.

l Initial savings: the amount of money you already have set aside for college

l Contribution amount: If you have a dollar amount youd like to contribute monthly, put it in here. You can change the amount to

see how the totals change on the calculator.

l Assumed rate of return: This calculator sets a default rate of six percent.

What the Calculator Will Tell You

l What four years of college will cost by the time your child attends

l How much money your savings plan will have earned by that time

l Your savings shortfall

l What you would need to do to make up the difference, either as a lump sum, additional monthly contributions, or additionalyearly contributions

Keep in mind that most students do not pay full price for college (see The Real Cost of College). Note: This exercise focuses on

tuition only. College costs usually include room and board, books, and other costs.

Putting It All Together: Three Examples

1. Aaron and Julie have a new daughter, Alicia. They want to open a 529 college savings plan for her with the hope that she will attend

Big State University in eighteen years. They already have five hundred dollars to open up an account. They are not sure how much to

invest monthly, but think that fifty dollars a month sounds reasonable. Lets see:

l Todays tuition at Big State U: $9,000l Tuition inflation rate: 6 percent

l Years to save before college: 18

l Initial savings: $500

l Monthly contributions: $50

l Rate of return: 6 percent

According to the calculator, in eighteen years, four years at Big State University will cost $112,380, or about $25,689 per year. Aaron

and Julies 529 Plan will have $20,567, not quite enough to cover one years tuition. If they set their monthly contributions at $100 per

month, they will have $40,550, enough to cover all of Alicias first year of school and $14,800 of her second year. To fully fund Alicias

http://www.tiaa-cref.org/calcs/tuition/calculator.html


5/17

college tuition, they would need to set aside $265 per month.

2. Phil and LaDonna have a ten-year-old son, Ty. They haven't really thought much about college, but now that Ty is approaching

middle school, they think they should invest something toward his college education. They plan to start with the thousand dollars they

received as a federal tax refund, and then deposit one hundred fifty dollars a month in a 529 plan. Will that work? Heres how the

numbers work out:

l Todays tuition at Big State U: $9,000

l Tuition inflation rate: 6 percent


l Initial savings: $1,000

l Monthly contributions: $150l Rate of return: 6 percent

According to the calculator, in eight years, four years at Big State University will cost $62,752, or $14,345 per year. By investing one

hundred fifty dollars a month, Phil and LaDonna will have saved $20,321, enough to pay for one full year and part of a second. If they

were to invest $265 a month (what Aaron and Julie need to invest to fully fund their childs education), they would have $35,609,

enough to pay for about 2 1/2 years of college. To fully fund Tys college education, Phil and LaDonna will have to invest $455 per

month.

3. James and Elise have a fifteen-year-old daughter, Mandy, who just informed them that she wants to go to Big State University in

three years. James and Elise have never really thought much about paying for college. Mandy is a smart girl, but theyre not sure how

much she might get in scholarships. They decide to start putting something away but arent sure how much good it will do. Here are

the numbers:

l Todays tuition at Big State U: $9,000

l Tuition inflation rate: 6 percent


l Initial savings: $500

l Monthly contributions: $200

l Rate of return: 6 percent

According to the calculator, in three years, four years at Big State University will $46,892, or $12,044 per year. By investing $200 per

month, James and Elise will be able to pay $8,482 towards Mandys first year of college. If they invest $455 per month (what Phil and

LaDonna need to invest to fully fund their childs education), they will have $19,007, enough to pay for all of Mandys first year and

about two-thirds of her second year. To fully fund her education, they will need to invest a whopping $1,073 per month.

These examples illustrate the benefits of investing early for your childs college education. But if you havent started saving yet, does

that mean you shouldnt? Should James and Elise even bother if all they can put aside is two hundred dollars a month? Absolutely.

The $8,482 they save is $8,482 they wont have to borrow and pay back later. Saving is always worthwhile.

You may wonder if saving now will cut your childs financial aid later. A little for some families, but youre still better off having moneythan not, just as youre better off earning wages than not despite income taxes. Using todays aid formula, a low- or middle-income

family could lose up to five dollars in aid for every one hundred dollars extra they saved in any of the current college savings tools.



6/17

Set Aside Twenty-five Dollars a Month for CollegeWithout Raiding the Sofa Cushions

Though it is hard to predict exactly what the cost of your childs college education will be, you can commit now to saving something

anythingto help pay for it. The key is to make a plan and stick with it. Even the most modest amount of money saved regularly and

consistently can grow into an important source of financial aid for school. Plus, setting up a college saving program shows your child

that you expect him or her to go to college and that you believe college student financial aid is a goal worth working toward.

Why twenty-five dollars? Many 529 college savings plans allow people to begin investing with only twenty-five dollars a month, so

thats a good starting place. Where will that twenty-five dollars come from? Here are some ideas.

Change You Can Believe In

Start a coin jar and ask everyone in the family to empty their pockets and/or coin purses into it at the end of the day (twenty-five dollars

a month is about eighty-three cents a day). One way to make sure you will have coins to contribute is always pay with paper money

and never use change. That way you will get change back from every transaction.

Bank on Coupon Savings

When you use coupons to reduce your grocery bill, dont just congratulate yourself on the money you saved. Take that amount (its

usually listed at the end of the grocery bill) and put it aside. Coupon money will add up quickly.

Create a Game

As a family, come up with ideas for making saving fun. For instance, every time a letter from a college arrives, toss a dollar into thekitty. When the college is on your childs dream list, increase the amount to five dollars. When your child brings home good grades ona report card, dont pay him or her for every A or B. Pay the college fund instead.

Skip the Vending Machines

If you typically hit the vending machine for an afternoon soda or candy bar, start bringing those treats from home. Vending machine soft

drinks can cost a dollar or more a twelve-pack of soda for four dollars works out to thirty-three cents a can. Ditto for candy bars, chips,

and cookies. Pack your own and earmark the savings for college.

Rethink Your Lunch Plans

If you eat lunch out every day, cut back even one day to save an average of seven dollars a week. When you do eat out, order water

instead of soda. Youll save nearly two dollars.

Get to Know Your Library

Libraries have more than books. You can borrow videos, DVDs, even video games for a lot less money than youd spend at the corner

video store. Most libraries also carry magazines if they carry your favorite, you can cancel your subscription and send that money to the

college fund.



7/17

Review Your Bills

Are you paying for things you dont use? Do you need call waiting and caller ID on your phone? Do you need your phone? (Many

people are giving up their land lines and making their cell phone their main line.) Are you paying for premium cable channels that you

never watch? Will bundling your phone and Internet cost you less than paying for them separately? Is your cell phone plan the most

cost effective choice for your family? Can you read the daily newspaper online instead of paying for a subscription? Take the time to

ask questions like these, and crunch the numbers to discover where a few extras dollars may be hiding each month.

Beat the Budget

If you budgeted one hundred fifty dollars for groceries and you spent only one hundred forty-six, put that four dollar savings into thecollege fund. If you figured it would take forty dollars to fill up the car and it only took thirty-three dollars, put that seven dollars in the

college fund.

Share Your Good Fortune

When you receive unexpected money, such as a rebate, refund, or bonus, split it between yourself and the college fund. Encourageyour child to do the same with birthday and holiday money.

For more money-saving ideas, sign up for Michele Singletarys weekly personal finance e-newsletter.

Do an online search for money saving tips and explore Web sites like these:

The Simple DollarThe Dollar Stretcher

Better Budgeting

Money-Saving Mom

http://www.moneysavingmom.com/http://www.betterbudgeting.com/http://www.stretcher.com/index.cfmhttp://www.thesimpledollar.com/2008/02/06/little-steps-100-great-tips-for-saving-money-for-those-just-getting-started/http://www.michellesingletary.com/newsletter/default.html


8/17

Choose a Tax-free College Savings AccountThe Pros and Cons of Five Popular Options

Eduguide Staff

Even if your child will not be college age for quite a few years, its never too early to begin saving money for college. Here are five

different, inexpensive ways to start a tax-free college savings account. In order to pick the one thats right for you, weigh the pros and

cons of each. But in the end, any savings program is better than none.

529 Savings Plans

Pick the state that has the best plan for you. Choosing your home states plan can result in tax and other benefits. In Michigan,

EduGuides home state, families can begin with as little as twenty-five dollars in the Michigan Education Savings Program (MESP).

(See related ShortCut: Set Aside Twenty-five Dollars a Month for College: Without Raiding the Sofa Cushions.)

Pro: Contributions are eligible for state tax deductions. In Michigan, its a $10,000 tax deduction ($5,000 for single filers). You can use

529 funds at any accredited postsecondary college in the United States and at many schools abroad.

Con: The plans tax-free status is up for renewal by Congress in 2010. The account value may fluctuate depending on investment

options.

529 Prepaid Plans

Pay tuition now and lock in todays rates. Most states have prepaid plans. Example: with the Florida Prepaid College Plan, you can buy

your five-year-old two years of tuition at community college (a lump sum of $4,193) with $37.14 paid every month until your child starts

college. The same two years of college thirteen years from now when your child starts college could be nearly $10,000. By prepayingand locking in todays rate, you could save $5,900. If you didnt lock in todays tuition rate with a prepaid plan, youd need to save

seventy-seven dollars each month to pay for the same two years of college.

Pro: Guarantees against rising tuition costs. Monthly payment contract will motivate you to save. Can be used to pay for tuition at out-

of-state and private colleges. Some states offer tax benefits associated with these plans.

Con: State residency requirements. Some plans have restrictions on transfers to another child. The money is tied up until the child

starts college.

Education Savings Account

Open an account with any bank, broker, or mutual fundmuch like retirement savings.

Pro: Can be used for college or any educational expenses K-12including books, private school tuition, computers, and tutors. Lets

you pick your own investments.

Con: Limited to $2,000/year per child. Tax benefits for some plans phase out for some families making more than $95,000. May temptyou to spend before your childs college years.

Cash Back

Buy selected goods with a registered credit card and get one to ten percent cash back for a college savings account. Upromise,EdExpress.com, Babymint.com and MBNA Fidelity credit cards offer such programs.

Pro: Save while you spend. Average annual savings range from fifty to five hundred dollars. Registered friends can direct their

earnings to your account.

Con: Limited dollar value. Fewer investment options. May tempt you to chase rebates and eat up savings you could put into your childs



9/17

account.

Roth and Traditional IRAs

Tax laws now let you take money from these retirement accounts to pay for college without penalty. You can open IRA accounts at any

bank or investment agency.

Pro: Some experts recommend saving for retirement or a home before saving for college. This option allows you to save for both and

choose how to spend later. You can pick your own investments.

Con: Limited to $5,000 a year per person if you are forty-nine or younger in 2008. Some restrictions apply. May confuse your retirement

planning your retirement fund may not attract contributions from family members.



10/17

Choose the Right Student Loans for CollegeThe Pros and Cons of Five Popular Options

EduGuide Staff

Student loan information can seem overwhelming. Here is a quick review of the five types of student loans for college and the pros

and cons of each.

Perkins

Best federal government need-based loan for students.

Pro: Lower fixed interest rate. No fees. Credit history not a factor unless you are in default on prior student loans. Subsidized, so

interest doesnt start until after graduation.

Con: Funding limited to those with greatest need.

Stafford

Most common federal student loan.

Pro: Fixed interest rate better than PLUS loan. Can be subsidized depending on need. Repayment is more flexible for disability or job

loss than most private loans.

Con: Limit on how much can be borrowed using this loan.

PLUS (Parent Loans for Undergraduate Students)

Most common federal parent loan. Also used by grad students.

Pro: Fixed interest rate. Can cover full cost of attendance minus other aid.

Con: Subject to credit approval. Not as good a deal as Perkins or Stafford.

Sponsored

Provided by some colleges, states, employers, and scholarship groups.

Pro: Can be a better deal than some federal loans.

Con: Harder to find. Ask around and use scholarship directories.

Private

Provided by banks and credit unions independent of the federal system.

Pro: May cover expenses beyond aid award.

Con: Subject to credit approval. Read the fine printsome private loans may compete with PLUS loans, but some are way more

expensive than federal loans.



11/17


12/17

Bonus tip: If you apply online, your application will be processed faster and will likely be more accurate because your application will

be processed on the FAFSA Web site to catch errors. The online application also provides worksheets that will calculate amounts and

enter them into the field for you. You can save and continue the FAFSA at any time online and then sign your application electronicallyusing a personal identification number (PIN) which you can get from the Federal Student Aid PIN Web site.

There are resources available if you decide you need assistance filling out the FAFSA. Check the FAQ section on the FAFSA Web site,

or call the Federal Student Aid Information Center at 1-800-4-FED AID (1-800-433-3243). You can also participate in College Goal

Sunday in your state for personal assistance completing the FAFSA. College Goal is held every February at a college campus near

you.

http://www.collegegoalsundayusa.org/


13/17


14/17

Community Service Ideas That Help Students Pay College ExpensesElizabeth Johnson

Many students who take out student loans for college hope to land high-paying jobs after graduation to help make their loan

payments. However, several organizations offer repayment or forgiveness of federal student loans (such as Perkins, Stafford, Direct

Loans, and FFEL loans) in exchange for a commitment to work in areas that need professional skills and services. Here are six

community service ideas that help pay for college.

Community Service Project Ideas

l Who has a program? Working in the Peace Corps or AmeriCorps VISTA (Volunteers in Service to America) allows you to use

your knowledge and skills to help needy people in the United States and internationally.l What will I do? AmeriCorps VISTA programs provide opportunities for people to serve through a network of partnerships with

local and national nonprofit organizations. During a year of AmeriCorps service, you might:

Tutor disadvantaged youth

Fight illiteracy

Provide health services

Build affordable housing

Teach computer skillsClean parks and waterways

Operate after-school programs Respond to disasters

In the Peace Corps, youll do similar jobs in one of seventy-six developing countries throughout the world. The Peace Corps

asks members to make a two-year commitment, but you can work longer if you desire.

l How much can I earn toward college? If you have not yet gone to college, AmeriCorps VISTA will award you $1,200 that can beapplied to your college expenses. Peace Corps members can receive scholarships, reduced tuition, and academic credit

toward advanced degrees at many universities.

l How much of my student loans will be forgiven? When you serve full time with AmeriCorps VISTA after college, youll receive

$4,725 toward payment of your federal student loans. Part-time workers get a partial award. In the Peace Corps, after a year of

service, you can apply for deferment of Stafford, Perkins, and consolidation loans, as well as partial cancellation of Perkins

Loansfifteen percent for each year of service, up to seventy percent total.

l Where do I find out more? Visit www.americorps.gov orwww.peacecorps.gov for complete details on applying for a service

position.

Teaching

l Who has a program? The federal government created the Stafford Loan Forgiveness Program for teachers to encourage

teachers to work in low income schools or schools in areas with teacher shortages.l What will I do? Teachers who serve in certain low income elementary or secondary schools for five years and who have an

outstanding Direct Loan or FFEL loan balance can apply for loan repayment after completing their fifth year of teaching.

l How much can I earn toward college? This program is only for repayment of loans after college.

l How much of my student loans will be forgiven? Teachers who qualify may be eligible for up to $5,000 repayment of their

remaining student loan balances. Certain highly qualified math and science teachers working in eligible secondary schools or

highly qualified special education teachers may qualify for forgiveness of up to $17,500. People with a bachelors degree in

early childhood education working in eligible nonprofit child care facilities could have up to one hundred percent of their student

loans repaid.

l Where do I find out more? The federal student aid Web site has a page with extensive information about the Stafford Loan

Forgiveness Program for Teachers, including a list of eligible low income schools and the application for loan forgiveness.

http://studentaid.ed.gov/PORTALSWebApp/students/english/cancelstaff.jsphttp://www.peacecorps.gov/http://www.americorps.gov/


15/17

Medicine

l Who has a program? The National Health Service Corps and the Nursing Education Loan Repayment Program both offer loan

repayment programs for medical professionals who work in areas that need medical help, which are called Health

Professional Shortage Areas. Some hospitals and health care facilities have loan forgiveness programs for occupational and

physical therapists.

l What will I do? Medical professionals can either apply to work at eligible medical sites or check the national database to see if

their current employer is on the list. These people commit to working at the site for at least two years in order to qualify for loan

reimbursement. Current or prospective medical students can apply for scholarships in exchange for service commitments.

l

How much can I earn toward college? The National Health Service Corps Scholarship provides several scholarships forstudents in training to become primary care physicians, dentists, nurse practitioners, certified nurse-midwives, and physician

assistants who agree to provide two to four years of service in an NHSC approved site in a Health Professional Shortage Area

of greatest need. The scholarship covers tuition, fees, and a living stipend.

l How much of my student loans will be forgiven? Medical professionals who work for two or more years in areas with critical

medical shortages can have as much as sixty percent of their student loan balances forgiven. Doctors, nurse practitioners,

dentists, dental hygienists, mental health professionals, and physician assistants who agree to work in areas that lackadequate medical care as identified by the National Health Service Corps could have up to $50,000 in student loan

repayments in exchange for two years of service.

l Where do I find out more? Check out the Nursing Education Loan Repayment Program and the National Health Service

Corps. The American Physical Therapy Association and the American Occupational Therapy Association have information on

loan forgiveness programs, and the American Association of Medical Colleges has a database of state and other non-federal

repayment programs for medical school students.

Law

l Who has a program? Many states, law schools, and employers have loan repayment and forgiveness programs for law

school graduates who work in public interest or nonprofit positions.

l What will I do? People working as state or local prosecutors, public defenders, civil legal aid, or legal advocates in low income

communities at nonprofit organizations may qualify for loan repayment assistance. Criteria vary by program.

l How much can I earn toward college? These programs assist law school graduates who are working in lower-paying public

interest law positions. The Equal Justice Works Web site (see below) has a list of law schools that offer grants andscholarships to those studying public interest law.

l How much of my student loans will be forgiven? Loan repayment amounts vary from program to program. Proposed national

repayment programs may pay an average of $2,000 to $10,000 per year for qualified service in public interest law.

l Where do I find out more? Equal Justice Works, formerly the National Association for Public Interest Law, has information

about law school loan repayment assistance programs, including a list of participating schools. It also has information about

employer-based and state-based loan repayment assistance programs and the Higher Education Reauthorization Act loan

repayment assistance programs.

Military

l Who offers a program? Each of the five branches of the military (Army, Navy, Air Force, Marine Corps, and Coast Guard) offers

tuition assistance, scholarships, and student loan forgiveness plans of various types.

l What will I do? Serve your country for a specified number of years through a branch of the military, the reserves, or the National

Guard either before or after college to receive tuition assistance and loan repayment benefits.

l How much can I earn toward college? If you want to go to college first and serve in the military later, the Reserve Officer

Training Corps (ROTC) has merit-based scholarships in return for a three- or four-year military commitment upon graduation. If

you want to serve in the military first, you can earn or save up to $50,000 toward college expenses. Students who serve part

time in the Reserves can receive up to $24,000 toward college in exchange for a commitment of one weekend Reserve serviceeach month, plus two training weeks a year.

l How much of my student loans will be forgiven? If you enroll in the military after graduation, the military will make payments

directly to your student loan lender to help you pay for college. Each branch has its own criteria for loan repayment, so its

important to ask a recruiter for information. For instance, soldiers can qualify to have one-third of their loan repaid for each year

of full-time service, up to a maximum of $65,000. The Air Forces College Loan Repayment Program has a maximum payment

of $10,000.

l Where do I find out more? The tuition support page of the Web site Todays Military explains many ways the military can helpyou pay for college or repay your loans.

http://www.todaysmilitary.com/benefits/tuition-supporthttp://www.equaljusticeworks.org/http://services.aamc.org/fed_loan_pub/index.cfm?fuseaction=public.welcome&CFID=234790&CFTOKEN=57343871http://www.aota.org/http://www.apta.org//AM/Template.cfm?Section=Homehttp://nhsc.bhpr.hrsa.gov/http://bhpr.hrsa.gov/nursing/loanrepay.htmhttp://studentaid.ed.gov/PORTALSWebApp/students/english/cancelstaff.jsp


16/17

Public Service

l Who offers a program? The federal governments new Public Service Loan Forgiveness Program helps employees in public

services jobs pay their student loans.

l What will I do? You may be eligible for this program if you work full time in a public service job such as a federal, state, local, or

tribal government organization, agency, or entity public child or family service agency tribal college or university organization

that provides emergency management, military service, public safety, law enforcement, public interest law services, early

childhood education, services for individuals with disabilities and the elderly, public health, public education, public library

service, or school library services.

l How much can I earn toward college? This program is available only to college graduates.

l How much of my student loans will be forgiven? The amount will vary. The program forgives remaining student debt after ten

years of eligible employment and qualifying loan payments, as long as you are still working full time in an eligible job and havedebt remaining after one hundred twenty qualifying payments.

l Where do I find out more? Visit Public Service Loan Forgiveness orThe SmartStudent Guide to Financial Aid for additional

details.

Bonus tip: Many states have loan forgiveness programs for teachers, medical and legal professionals, and other workers. Check with

your employer to see if you qualify for any state loan forgiveness programs.

Elizabeth Johnson is a freelance writer in Lansing, Michigan, who is navigating the world of student loans for college with her teenage son.

http://www.finaid.org/loans/publicservice.phtmlhttp://www.ibrinfo.org/what.vp.html#pslf


17/17

Due to the dynamic nature of our quizzes, they are only available on the web. Follow the addresses below to take a quiz on our

website.

How Much Do You Know about Saving Money for College?

http://www.eduguide.org/Parents/TakeQuiz/tabid/114/quizId/30/view/StepTakeQuiz/Default.aspx
http://www.eduguide.org/Parents/TakeQuiz/tabid/114/quizId/30/view/StepTakeQuiz/Default.aspx

Help My Child Pay for College

Documents

Transcript of Help My Child Pay for College