Head of the class: Smart college savings strategies
The cost of a college education is on the rise. What’s reassuring is that you know exactly when your children will be ready for college – and that gives you time to plan and time to save.
Here are some strategies to consider:
Start early. Most people are on a tight budget these days, so it’s important to start saving for college as soon as your child is in diapers. Even a modest amount invested from each paycheck can really add up if you give it enough time to grow.
Do your homework. Of course, you can’t know exactly what college will cost until your child has been accepted. But there are ways to get a pretty good idea of what’s ahead for you. Visit www.finaid.org for calculators that will help you figure out how much it will cost, how much you need to save and how much aid you’ll need. When you do start looking at specific colleges, ask enough questions to understand what the total cost will include, so you’re not hit with surprise costs later on.
Invest wisely. What are your best investment options, based on the number of children you have and the number of years you have to save for their college education? Stocks? Bonds? Mutual funds? Although these products are not FDIC insured or bank guaranteed, and may lose value, they’ll still help you maximize your investments while protecting your tax status. A financial advisor can help you choose a plan that’s right for you.
Consider a 529 Savings Plan. With no income limitations or age restrictions, 529 savings plans are a good way to save while enjoying great tax breaks.
Apply for grants, scholarships and loans. You might not need to save the full amount of a college education if your children are able to secure a federal, state or private grant or scholarship, which are usually tax-free and don’t require repayment. These include federal Pell Grants and Supplemental Educational Opportunity Grants, as well as work-study programs. Your child’s high school guidance counselor should be able to point you in the right direction for any grants or scholarships for which you or your child would be eligible. Loans, like the federally funded Perkins and Stafford programs, can also help ease the pressure of saving, as will a PLUS Loan (Parent Loans for Undergraduate Students).
Find the “free money.” There are two federal tax credits available for tuition costs: the American Opportunity Tax Credit and Lifetime Learning Credit. Both reduce the tax you owe and can be used against tuition payments made by using student loans.
Northwest knows that a college education is the path to a brighter future. Call Northwest Direct at 1-877-672-5678 or visit your local office to discuss savings options.