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For parents, funding part or the entire cost of their college-bound child's education can seem overwhelming. After all, sending a child to college is one of the most significant expenses facing families today. Parents assuming the responsibility of financing their children's college education need not despair however, for a host of parent plus loans and resources are available to pave the way for their children's academic future.
529 plans (named after the IRS code section creating them) is one of the optimal ways for parents to save for their children's education. Each state sets the monetary limit that parents may contribute each year on behalf of their child. The contributions are tax-free, and there are no use limitations since the funds may be applied towards any purchase. Parents can open a 529 plan with an amount as low as $25 and invest more than $300,000 per child. There are two kinds of 529 plans- 529 savings plans and 529 prepaid plans. 529 savings plans consist of mutual funds that increase in value tax-free and can be spent on any qualified college expense. With a 529 prepaid plan, on the other hand, a contract is signed authorizing the parent to lock in the current tuition rate at public and a few private universities in a specific state.
A Coverdell Education Savings Account (ESA), an investment account with tax advantages, is another great college savings tool for parents. There are no income requirements to open an ESA. Parents can deposit up to $2,000 in annual funds (until their child's 18th birthday) and apply them toward any college expenses.
Parents might also consider investing a monthly sum as small as $50 with Upromise Investments and deposit it into their child's Upromise College Fund account.
Parents can begin their financial planning by accurately determining their child's college costs. This will mean calculating the direct and indirect expenses. Direct costs include tuition, on-campus room and board, and fees. Indirect expenditures concern such items as transportation, personal expenses, computers, and personal expenses. Parents will then have to evaluate affordability. The assessment will help parents obtain an estimate on the cost of enrolling in their child's choice of colleges, the typical financial aid awards distributed, and the amount for which they will be held responsible.
In deciding how to pay for their children's education, parents should carefully explore and weigh all their financial aid options since the cost of a college education can vary significantly from school to school. On the College Answer website, parents will find four other calculators to help them examine their financial needs and formulate a savings plan. The long-term planning calculator computes for them an estimate of the monthly savings required to pay for the education of up to three children considering enrolling in college. The college-cost calculator offers an estimate of the future cost of enrolling at a particular university. The future savings calculator allows parents to get an estimate of the sum they will have set aside by the time their child enters college. Finally, the monthly savings calculator estimates the quantity of funds that parents will have to save every month to attain their college savings objective.
However, before applying for a loan, parents should not overlook the free money offered by scholarships and federal grants, which are available from a number of organizations. In sum, parents seeking to assume part or all of their child's college education expenses should keep in mind the old adage, "A little preparation goes a long way".
Additional parent plus loans:
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