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Make Your Family’s Education As Debt-Free As Possible

December 7, 2009
Times Observer
Whether you intend to send your child off to college or plan to pursue an academic or vocational path for yourself, reducing student debt load makes good financial sense, especially since the sticker shock of almost all kinds of post-secondary education can be daunting.

The net price of four-year colleges has risen rapidly since 2002 and the average increase in tuition and fees at public four-year colleges in 2008-2009 was 6.5 percent, according to the College Board. Twenty percent of students attending colleges and universities experienced an increase of 9 percent or more.

Unfortunately, this has occurred against the backdrop of the current recession, which has meant the elimination of many scholarship programs. According to U.S. News and World Report, financial aid will get tougher for anyone hoping for free money from any of the three main sources of scholarships: governments; charities, foundations and corporations; and schools.

Now is the time to learn the ins and outs of funding a post-secondary education. Here are some tips to help you get "smart" about paying for education costs.

• Start an education savings plan. If your children are quite young, or if you are making plans of your own, you may want to consider putting savings aside, taking out a prepaid tuition plan or establishing a 529 plan. Your relatives and friends may also want to participate in your family's savings strategy by contributing to your education savings as part of their holiday gift-giving, or to mark special occasions such as a marriage, anniversary or birth of a child. Or, you can decide to set aside any such cash gifts and keep them in an education savings account to redeem later, when needed.

• Check out scholarships. Beyond scholarships offered by individual colleges and universities, look for scholarships in unusual places. Community foundations, civic groups, religious groups, chambers of commerce, charitable trusts, public companies and private organizations also offer scholarships. For example, Foresters provides members with innovative life insurance products and benefits of membership such as a competitive scholarship program for its members, their spouses and dependent children. The scholarships, which recognize volunteering and community service in equal measure to good grades, are designed to encourage and support those who make volunteering an important part of their lives. Up to 350 scholarships are available for many kinds of post-secondary education, including vocational and trade schools, colleges and universities, and, unlike many other scholarship and loan programs, can be applied to tuition as well as room and board. It's also important to familiarize yourself with tax considerations related to scholarships, as scholarships are tax-free on certain qualifying tuition and fee (but not room and board) costs.

• Consider the impact of inflation. College prices today are not going to be the same as they will be in the year 2027, when children born in 2009 will likely begin their freshman year. The College Board reports that published college prices rise more rapidly than other goods and services, a trend that has persisted for more than 30 years. Continuing this compounding trend forward 18 years, this could result in four-year education expenses costing literally tens of thousands of dollars more than an equivalent education today. So it is important to budget and save in accordance with the cost of education in the future and not simply base a savings plan on the cost of an education today.

• Plan for the long term. Having a life insurance plan can add financial security for your family's education. If you haven't put a life insurance plan in place, now is a good time to do so. For example, should your heirs need financial assistance after you've passed away, a life insurance benefit could be used to help pay for their post-secondary education.

By taking these steps and seeking help from qualified financial advisors, you have a better chance of making your family members' post-secondary education as debt-free as possible.

Courtesy of ARAcontent

 
 

 

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