Strategies help keep cost of college down
By Sandra Block
USA Today
If your child is a high school junior, you're probably accustomed to unpleasant surprises. Pierced eyebrows. Purple hair. A sudden interest in your old Foghat albums.
Those shocks are usually temporary. The alarming increase in college costs is not. The average cost of attending a Big Ten Conference school is more than $15,000, and many states are expected to increase costs for 2003.
The good news: Most students don't pay full freight. At four-year public colleges and universities, more than 75 percent of students receive financial aid, according to the College Board.
Some steps you should consider:
• Invest in a 529 plan.
Such plans have become popular with parents of young children with lots of time to invest. But they can also provide a way to shelter your short-term college savings from taxes.
Interest and earnings on money invested in a 529 plan is tax-free if the money is used for college. Many 529 plans offer low-risk portfolios that invest in bonds and money market funds. Larry Glazer, a financial adviser with H.C. Wainwright in Boston, suggests looking for a plan with a short-term bond fund.
Be sure the plan you choose doesn't have early withdrawal penalties. A few plans penalize participants who withdraw money before a specific date, even if they use the money for college. You can research 529 plans at www.savingforcollege.com.
• Review your assets.
Even if you probably won't fill out financial aid applications until early 2003, you can take steps now to improve your eligibility.
If you have cash in a bank account, use it to pay off credit card or other high-interest consumer loans. When determining how much financial aid to give you, colleges use what's known as an "expected family contribution," which measures how much you can afford to pay. Money in your bank or checking account will be included when your EFC is calculated, says Mark Kantrowitz, a financial aid consultant and founder of www.finaid.org.
But credit card debt won't lower your EFC, he says. "You get no points for having credit card debt, but it counts against you if you have money in the bank," he says.
• Boost contributions to your 401(k) and other retirement plans.
Financial aid formulas usually exclude retirement savings when calculating how much you can contribute, says Trent Anderson, managing editor of Kaplan's "Conquer the Cost of College." Another benefit: Contributions to your 401(k) will reduce your taxable income, which could result in more financial aid.
• Put your child to work.
Paying for college is a team effort.
Encourage your child to start applying for scholarships for the 2003 academic year. There are thousands of scholarships available, and your child doesn't have to be a genius or basketball star to qualify. A good place to start is www.wiredscholar.com, operated by Sallie Mae.
Look into programs that allow your child to work while in school. Many financial aid packages include work-study programs.
Your child also may be able to find a job with a company that offers tuition assistance to its employees. One of the most ambitious tuition assistance programs is offered by UPS, which offers part-time employees up to $3,000 a year toward tuition and fees.
