Back to school brings parents a sigh of relief in one sense but it also brings to mind the cost of higher education.
If your student is bright and talented, there is a possibility he/she might qualify for Merit Aid. Be aware that some elite colleges may not offer merit aid to all students. Merit aid might be only offered for certain majors, e.g. engineering or computer science or particular talents, e.g. music, dance, athletics.
Parents need to research those colleges offering merit aid and learn the criteria needed to quality.
Financial Aid (need-based) may be available based on the student's family situation. The formula: cost of attendance - the Expected Family Contribution = need, determines eligibility. The EFC, the result of two formulas from FAFSA and CSS Profile, is the amount a family can afford to pay each year.
Parents need to learn their EFC early and develop a strategy to make their student eligible for aid.
Student loans are both a help and a curse. Over time, the interest can add tens of thousands of dollars to the cost of college. Parents borrow from home equity, retirement plans and Parent Plus loans all adding the interest costs to the college expense.
The key is to borrow the bare minimum, search for the lowest interest rates and pay off everything as soon as possible!
529 Plans are an effective way to plan for college:
- They can be set up as a systematic deposit.
- Depending on your state, they may offer a tax credit.
- The gains are not taxed when used for qualified college expenses.
- They reduce the amount of money taken in loans.
Be $ Smart - do some homework, plan ahead, be aware of the extraneous costs of college and borrow as little as possible.