8 Tips on How to Prepare for College Expenses
By Robert Vandenbergh
If you think you can’t afford college, you’re not alone. Nearly three-quarters of Americans surveyed in a recent Pew study said they couldn’t afford a college education.1 But that same study also revealed that college graduates earn an average of $250,000 to $500,000 more over their lifetime than those without a secondary degree.
While there is no denying that times are tough—and college is expensive—that doesn’t mean it’s out of reach. Financial planning and smart financing can go a long way to making higher education affordable.
1. Know the cost of college: Try to choose both public and private schools to give yourself a range of costs. Remember that the college “sticker price” may not be the actual price you pay. Financial aid and scholarships can help lower the cost.
2. Savings calculator: The earlier you start saving for college, the less money you need to put in each month. To determine how much you need to save for college, visit our online savings calculator.
Consider various funding options, such as:
3. 529 Plan: A 529 plan is an education savings plan operated by a state or educational institution. Created in 1998 by Section 529 of the Internal Revenue Code, a 529 plan is comparable in safety to buying U.S. government bonds. There are two types of 529 plans. 1) Savings plans are similar to 401K or IRA accounts. 2) Prepaid plans let you pre-pay the costs of an in-state college education in today’s dollars for the equivalent amount of tuition in the future.
4. Investment accounts: Investing in stocks and bonds can yield profitable results over time. Since this money is critical to your child’s future, it is important that you match the risk profile to the remaining duration before the funds will be required.
5. Certificates of deposit (CDs): CDs typically offer higher interest rates and greater growth potential than savings accounts. They also are less risky than stocks and bonds.
6. Loans – federal and private: The government offers financial aid in the form of federal student loans. These loans are the most common and usually carry the lowest interest rates. Students must file a FAFSA, or Free Application for Federal Student Aid, at FAFSAonline.com. Private loans also are available but may carry higher interest rates or stricter repayment terms.
7. Home equity line of credit: A lower cost alternative to private loans, a home equity line of credit also may be used to finance education. This is a loan against the equity accrued in your home so it is important to carefully consider the repayment requirements.
8. Scholarships and Grants: There are a variety of scholarships and grants available for college. Scholarships reward talent in certain areas, from sports to academics, but also are available if students fit certain demographic criteria, have a special interest or write a compelling essay. Scholarships are direct grants to a college or can be paid to the student, but the funds do not have to be repaid.
Each year, Lakeland Bank awards scholarships from donations received at its annual golf tournament. To date, Lakeland Bank has awarded more than $ 1 million to Northern Jersey students to pursue higher education. For more information on Lakeland Bank please visit: lakelandbank.com.