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Graduation Season, Do You Have That College Fund Ready?

Wednesday, June 15, 2016

You Didn't Put Money Away for Your Kid's College Fund. Now What? You're going to quickly become an expert on borrowing money.

They grow up so fast. Too fast. That realization can come crashing down as kids approach college age, and there's no money (or nowhere near enough) in a savings account or a 529 plan.

You wanted to save money, or save more, of course. But maybe something got in the way, like a health issue, divorce, credit card debt or the recession. Or maybe you simply didn't make enough. There's no use blaming yourself. Whatever happened, happened.

It is probably too late to save up the tens of thousands your kid will likely need for college tuition – but it isn't too late to start the borrowing and begging process. Just don't wait any longer.

Start with the FAFSA
. That is, you'll want to fill out the Free Application for Federal Student Aid form, or FAFSA, as soon as possible. Why? So you can see what federal aid your kid is eligible to receive.

If your student hopes to begin classes during the fall of 2016, you have until June 30, 2017, to apply for loans for the 2016-2017 academic year. And, sure, it might sound like that's plenty of time to apply for money, since you can request financial aid long after your kid starts college. But you know the saying: The early bird gets the money. Or something like that.

Plus, going after money earlier means you aren't colliding into as many parents later. The closer you get to the fall, the harder it may be to get not only money but to have questions about that money answered.

"Financial aid offices receive thousands of calls during the summer months, which can impact response times to students," says Geoff Marsh, senior director of financial aid at Biola University in La Mirada, California. He adds that the larger schools' financial aid offices receive calls in the tens of thousands over the summer.

And many states use the FAFSA form to determine whether you're eligible for financial help with college, and your state may have a deadline that's much earlier than June 30, 2017. For instance, Ohio's deadline is October 1; Kansas's was April 1, 2016. Universities and colleges often have their own deadlines for determining financial aid, too, and many universities ask students to submit deposits for the following school year on May 1. So if you haven't started looking for financial aid for the upcoming school year, you really need to move on this now.

Ask the experts for their advice.
Start with friends and family members who have college-age kids, and see what they did to find money. You may also want to discuss private loans with your bank, although keep in mind that private student aid loans are generally tougher than federal loans; that is, they have more interest and more restrictive payment plans. Still, if you have good credit, you may want to start a dialogue.

But if you work for a relatively big employer, certainly take another look at the benefits package in case there's any tuition assistance your kid could get, or talk to the human resource department, suggests Jennifer Horner, director of financial aid at Eastern Connecticut State University.

Horner also suggests that your child meet with the high school guidance counselor, stat. "Often the guidance counselors have information about scholarships to which the student can apply. Scholarships should always be an option explored. They take a little elbow grease but can greatly reduce a student's bill," she says.

Change your expectations. If you don't have money saved up, and paying for a traditional four-year college is going to be a reach, you may want to adjust your thinking about sending your kid to one, says Derrick Handwerk, who owns a Lansdale, Pennsylvania-based wealth management firm that specializes in working with affluent families.

"I would suggest that a child look into a two-year program at a community college that has agreements with larger universities so the child can matriculate to a university that offers a four-year bachelor's degree," Handwerk says. "At the end of four years, the student will have [a] bachelor's degree diploma from a name-brand university, and if they live at home, they can have the degree for less than $50,000 total."

True, you may have never imagined your child living at home or missing out on dorm life, but Handwerk offers his opinion that if it's going to be a huge financial burden, it's really not worth it.

And, of course, you could try to pay as you go. Many colleges offer some sort of pay-as-you-go plan, whereby after the financial aid package is tapped out, you pay the tuition costs every month. There generally is no interest, which is a big plus, but it can be a big drain on your budget if you aren't ready for it, Marsh says.

"It might mean downsizing in other areas of life to allow more of a family's current income to go towards college costs," Marsh says.

Handwerk doesn't suggest that you downsize too much, however.

"I believe that we have a higher education bubble," he says. "When the average family cannot afford the average education or home etc., etc., that is a bubble."

He adds, "To have your child take out $80,000 in loans to get through college, only to have about half of the jobs available to them not pay well and those jobs not needing a college degree, just doesn't make much economic sense."

Still, there's something to be said for higher learning, and census records and studies have shown that college graduates make significantly more money than high school graduates. So in that sense, it's worth it, right? It'll probably feel as if it is once your kid is wearing that cap and gown and holding that degree, and you're sitting in the stands with a goofy grin on your face.

Of course, that prideful afterglow may not last too long – if you're trying to help your kid pay for graduate school.

Source - US News


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