Planning for college is an exciting time for everyone involved. There is so much to learn, to experience, to explore, and to do! For parents and guardians, the college process can be both stressful and emotional as you gear up for this next stage and watch your child transition into young adulthood. One major challenge of this process can be paying for the rising cost of college. Uprooted Academy is here to walk you through the financial options you have. Let’s get started with this continued ‘Q&A” series on the financial process.
Question #1: What are the ways that I can pay for my child’s college?
There are several ways to pay for your student’s college tuition. Let’s dig in to the different options you have:
The 529 Plan. Parents are able to start contributing to the 529 Plan as soon as their child is born. When you contribute savings to this plan, this money can grow tax-free. Additionally, there are no taxes applied when this money is withdrawn to pay for educational expenses.
Paying out of pocket. If possible, the best way to pay for college is to use any savings and pay as much as possible directly.
Refinancing your mortgage. Some folks look into options such as refinancing their house. Whether or not this is the best option for you and your family depends on a variety of factors. For example, people with stronger credit scores generally get better interest rate offers on their mortgages, allowing them to save hundreds of dollars a month.
Scholarships. This is financial support that is awarded to students based on a set of criteria required by the scholarship committee. This money does not need to be paid back.
Taking out loans. Help your student begin to seek out scholarships that are relevant to you. This is also a good time to begin to learn more about the FAFSA (Free Application for Federal Student Aid) application process. Discuss with your student who will be responsible for payment upon graduation.
The FAFSA. The first thing to know about the FAFSA is that it is a free reporting tool which will help you determine your EFC (Expected Family Contribution). Your EFC is based on your income, assets, and the number of students you are supporting through college.
Federal Pell Grant. This is money awa