Sending a Child to College
Sending a child to college can leave you contemplating both an empty nest and an empty wallet. It’s never too early to start planning and saving…but it’s never too late, either. Whether you have several years to plan, or just a couple, Rivermark is your trusted resource during the uncertain financial times ahead. There is information below on college costs, money-saving tips, and financial strategies.
What Will College Cost?
Tuition and Fees can vary quite a bit based on your child’s school of choice, but some good averages are about $27,796 per year for a private college, $11,744 for an in-state public college, and $21,928 for a public out-of-state school*. Housing and meals can tack-on an average of $14,568. Then you have to consider the costs of books, computer equipment, etc.
Depending on your situation, some of those costs can be offset with Federal Student Aid. However, the amount your child might qualify for is based on the income of the parents, and might not cover all of the tuition and fees. Private funding can help bridge that gap. It’s a low-rate loan, plus payments can be deferred while your child is in school.
Saving & Budgeting
It’s a great idea to save early, and save often. The more you can chip away at it when your child is still young, the less you’ll have to save later on. For example, if you save just $50 per month starting at the age of 1, you’ll have $10,200 by the time your child is 18…and that’s without factoring in interest! Try to save that same amount starting at age 15, and you’ll need to sock away a little over $283 per month. Big difference.
Once you’ve decided to start a savings plan, there are lots of options available. The most popular are IRAs (Coverdell, Roth, etc) and 529 Plans, but selecting between them can be tough. Each has slightly different aspects that make it appealing, and the reality is that you don’t have to choose one or the other. When saving for college, much like saving for retirement, diversity is key. And if possible, maxing-out annual contribution limits is ideal. Some specific education savings accounts—like Coverdell or a 529 plan—are perfect for school expenses. However, if your child decides not to pursue secondary education, there are penalties for withdrawing those funds for other purposes. In addition, more of the assets located in a 529 account could be included in the financial aid calculation as opposed to with a Roth IRA. Understanding the pros and cons of each option can get really tricky.
Reducing Costs
College costs can seem overwhelming, but there are lots of ways to reduce them. Here are some great examples:
- Consider encouraging your child to attend a community college for the first two years. Many community colleges have arrangements with universities to make the acceptance and credits-transfer process easy when the time comes. Community colleges are much less expensive and are a great way to get those entry-level course requirements fulfilled at a fraction of the cost.
- Encourage your child to work during school. Their wages might not offset much of the total cost, but a 10-hour-a-week job could make them take the overall cost of school—and by extension their studies—more seriously. You could make arrangements with them to earmark those funds for a specific purpose—car insurance, ‘going out’ money, etc—which will offload some of your financial burden. If your child does work during school, make sure that they set-up direct deposit so that their funds are quickly available.
- If the service is available, talk to your child about ‘renting’ textbooks from the library for a quarter or semester. Or, they can be checked-out for several hours during a study session. Used books are a great option as well and can be purchased through the campus bookstore, or through online purchasing sites like Amazon, Craigslist, or Slugbooks where books can be purchased or rented.
Borrowing Strategies
Particularly if you joined the savings game a little later, borrowing funds to pay for your child’s education might be necessary. Beyond the traditional student loans mentioned earlier, you can also tap into other resources. If you own your home, the equity you’ve earned can be a great low-rate option for school expenses. A Rivermark Home Equity Line of Credit will give you an open limit that you can draw upon as needed, where a Home Equity Loan will give you a specific amount all in one disbursement. Both have low rates, and in some cases the interest is tax-deductible. That’s a huge plus when you’re already facing increased expenses.
If your child is in a program that will require expensive equipment, you can utilize low-rate credit cards or personal loans. You may even be able to use those avenues to consolidate higher-interest debt in addition to making purchases for your child’s education. Choosing Rivermark to fund those loans gives you a great advantage because Rivermark is member-owned and not-for-profit, which means better products and lower rates for members.
Preparing for Financial Independence
That first job out of college and financial independence can be a lot to handle, particularly if your child has never needed to go it alone before.
To ease the transition, get your child involved in setting a budget and sticking to it. Rivermark’s financial team can help—just give them a call for free budgeting assistance for your child. You can also encourage your child to start a savings plan of their own. Even a small amount can add-up, and having emergency funds is always a good idea, particularly when you’re away from home. Products like Name Your Savings from Rivermark will allow your child to name that savings account however they like. That may give them the extra motivation not to tap into funds that are in their ‘Computer’ or ‘Vacation’ savings.
If you’re planning on providing additional funds while your child is in school, help them during the budgeting process to earmark those funds for a specific purpose. That way, they can take care of necessary expenses before the temptation to use those funds for fun is too great. Transfers in Online Banking will make it easy for you to securely and quickly transfer funds to your child for free.
