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Paying for college begins with a plan

Attending college or helping your kids attend college is an important goal and dream for many members, but the cost of tuition can be daunting. Below are several strategies to help you plan and pay for college.

There is no one size fits all solution, so you’ll likely use a combination of strategies to develop your plan. Before you make any decisions, we recommend that you research your options and individual situation carefully, and consider consulting with a tax professional and financial advisor.

Step 1: Estimate your costs

To estimate your costs, consider where your student might attend college. If your child is young, this can seem like the distant future, but even a best guess will help you start saving for their education. This is important since the cost of an in-state school can vary significantly from an out-of-state school. Once you have selected some schools, visit collegeboard.org or the specific college’s website to help you estimate the cost of tuition, books, room and board and other expenses. Be sure to account for variances, such as living at home versus on campus or attending community college for the first two years.

Since the costs of college or your financial situation may change over time, you should reassess your plan every year. Two or three years before starting college, narrow down the preferred colleges and review the costs, application processes, timelines and financial aid options. The college admissions office can help you estimate your costs and eligibility for financial aid. Taking the time and initiative to research and ask questions is very important.

Step 2: Examine your options

Funding for college typically comes from financial aid, loans and savings. Financial aid is helpful if you qualify, but it can be difficult to predict qualifications years in advance. There are many different types of loans that can be used to pay for college including government-backed student loans offered through your college. Private student loans and home equity loans offered at the Credit Union can also help fund college. The amount you’re able to borrow is often based on your income and credit history, so be sure to make all loan and credit card payments on time and borrow wisely.

If you want to be confident that you’ll be ready to pay for college when the time comes, it’s best to start saving early and regularly. Opening a savings account at the Credit Union is an easy way to start. When you have enough money saved, you may want to move the funds to a certificate or money market account, which often offer higher yields. Also, many states have 529 college savings plans that may have tax advantages. Speak to an Ap Financial Planning advisor to learn more about the options in your state.

Step 3: Set up a savings plan

If four years of tuition and expenses cost $100,000 at the college of your choice and the student is going to college in 10 years, then you need to save at least $10,000 per year to have enough money when they start college. Some colleges offer a discount if you pay all four years at once. Since it's more common to pay by semester, you could have 13 years to save rather than 10. Therefore, you would only need to save $7,693 per year, or $481 per month. If this amount is not within your monthly budget, you could plan to borrow a quarter of the costs and reduce the amount you have to save to $75,000, or $5,770 per year, or $481 per month. A great way to maximize your savings is to structure your plan.

Assuming you are in a position to start saving $500 per month, here is a simple plan that can really add up over time. Deposit $500 per month into your Credit Union savings account. At the end of the year, you will have $6,000 to open a one-year certificate. Continue to save $500 per month in your savings account. When your one-year certificate matures, move the $6,000 from your savings account into the certificate during its seven-day grace period. Repeat this process each year. When your one-year certificate matures before each college year starts, move the money needed for that year into a money market account. Then, as you need to pay college bills, move the funds from your money market account to your checking account. Remember, you can only make six electronic transfers from your money market account into your checking account per month.

Here to help

Keep in mind that Educational Systems FCU provides Private Student Loans and scholarships each year. We offer the Dorothy Marvil Scholarship for graduating high school seniors, the Rosemary Brinkley Business and Finance Scholarship for high school business students, and a Community College Scholarship for those attending one of the community colleges we serve.

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Helpful tip
Use the “College Cost Calculator” provided by collegeboard.org to help you calculate the future cost of college tuition.
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