It’s also really stressful! How much is college going to cost? Where is the money going to come from? Who is going to pay for what?
In my college planning eBook, Pay Less For College, I recommend that families have a heart-to-heart conversation to discuss these three questions. At this stage of the game, I would hope you have had this conversation – several times.
Here are 7 ideas to help you pay less for college this year:
Don’t be greedy. It’s August and the stock market continues to roll on. But will it last? We haven’t had a market correction of 10% or more for over 1,000 days. When markets do well there is always the temptation to stay in longer than you should. Most economists and market forecasters agree that we are due for a correction. A correction of 10% or more right before you need to pay for tuition would be disappointing – to say the least.
If you know you are going to need to spend a specific amount in August or December when you pay your tuition bills, I suggest setting aside the money now. Even if it means selling an investment that is doing really well. The extra bit you may earn by staying in pales in comparison to what you may lose if the market winds blow in the other direction.
To refresh your memory, the Dow Jones Industrial Average, lost 18% during the week that ended on October 13th 2008. That puts a pretty big dent in the college savings. Fast. I am not saying that that scenario will repeat itself anytime soon, but risk and volatility are an inherent part of investing. Taking gains while markets are up, especially when you know you will need the money, can be a good idea.
Maximize the American Opportunity Tax Credit. The American Opportunity Tax Credit is an education related tax credit for parents with kids in college. The maximum credit is $2,500 per student per year for the first four years of college.
To qualify for the full credit your adjusted gross income must be under $180,000 for a married couple filing jointly ($90,000 for single filers). If your income exceeds that amount, consider ways to reduce your AGI such as increasing your retirement plan contributions, or contributing to a tax deductible IRA or Health Savings Account.
Get a Job. Some parents skip this step fearing that any extra income will decrease their financial aid award. Income earned in a work-study program is exempt from the financial aid calculation. If your student has earnings from a more traditional job, the financial aid folks tell us that they may earn up to $6,500 before it starts to reduce their financial aid award.
Employer-Sponsored Scholarships. Many employers, especially the larger ones, offer tuition scholarships to the dependents of their employees. As an added bonus, scholarships that cover tuition and fees are generally excluded from taxable income. Check with your employer to see what opportunities they offer.
Live at home. I know this is not your student’s first choice. In fact, it may not be your first choice either. But the room and board piece of your total cost of attendance at some schools can be as high as $10,000 or more. Obviously, if your student is going away to college, this is not an option; however, if your student is attending college near home it’s something to consider.
Loan forgiveness. Student loans are a necessary part of paying for college for most families. In some cases, however, student loan debt may be forgiven. Teachers, health professionals, the military, and some public sector employees may qualify for student loan forgiveness if they meet certain criteria or agree to work in under-served areas. For example, the Minnesota Rural Pharmacist Loan Forgiveness Program provides loan forgiveness of up to $64,000 for pharmacists who agree to work in certain designated rural areas.
Educate yourself. Paying for college is complicated and the rules change all the time. Attend one of my free college planning workshops that are held at various high schools around the Twin Cities. For a complete list click here.
Can’t make it to a workshop? No problem. Download my eBook, Pay Less For College, from Amazon.com for free on Wednesday, August 27th or Thursday, August 28th . The eBook is a written version of my college planning workshop. After the free promo expires, the book will return to its usual price of $4.99.
Need more info? The Minnesota Office of Higher Education has a fantastic website that is loaded with nearly everything you need to know about paying for college especially if you are a Minnesota parent. Download their PDF Paying For College. It’s one of the best college planning publications you can get anywhere and it’s free.
Another great resource, and one I use frequently is the blog, The College Solution, by Lynn O’Shaughnessy. Lynn is a financial journalist and arguably the country’s foremost expert on paying for college. In fact, I like to think of her as the “Ed Slott” of college planning. (Forgive me if Lynn, Ed and I are the only ones who get that reference.)
Make yourself a smarter consumer of a college education. Subscribe to her blog, download her book or take her course, Cutting The Cost of College.
Parents, you may have sent your student off to college already, but next semester’s tuition will be due sooner than you think. It’s never too late to find ways to pay less for college.
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