4th Quarter 2017

Affording the High Cost of College

This is often the time of year when parents tend to have sticker shock, when their thrill of having a child accepted to the college of his or her choice is accompanied by the dread of having to figure out how to pay for it. How do other families do it?

Start saving early. Find out how much the colleges your children may be interested in will cost, and set a savings goal - such as saving for the cost of public school tuition in your state, or saving half of the cost. You can adjust this number through time, but it will give you a solid goal to get started.

Take advantage of tax breaks for saving. You can set aside money in a 529 college-savings plan, where earnings will be tax free if used for college tuition, fees, books, and room and board. Many states offer a state income-tax deduction for your contributions. A 529 plan can also be a great way to help your grandkids with college costs. The money can be used to pay for education at any accredited public or private college in the U.S. and many foreign colleges. Your child doesn't have to attend college in the state that sponsors the 529. See for more information. If your child or grandchild doesn't go to college, you can switch the account to another relative. And, note this: the sweeping tax overhaul signed in December allows up to $10,000 of 529 money to be used tax-free each year to pay for elementary or secondary school, in addition to college costs. The new rule covers 2018 and future years.

Apply for financial aid. The federal Free Application for Federal Student Aid (FAFSA) can be filed anytime between Oct. 1 until June 30, but the earlier the better because some aid is awarded on a first-come, first-served basis. It's worthwhile to apply even if you think your income may be too high to qualify for aid. Some colleges give grants rather than offering loans to middle-income families, and the income levels to qualify are often higher than expected. See for more information and to apply for aid. Also ask the colleges you're considering if they require any other aid forms, such as the CSS Profile, which is used by about 400 major colleges.

Search for scholarships. Learn about various scholarships by contacting the college's financial aid office and your student's high school guidance office. Ask about local scholarships and find out if your employer or other organizations offer them. The ICMA-RC Public Employee Memorial Scholarship Fund, for example, provides several scholarships each year for the children, widows, and widowers of public sector employees who died in the line of duty. See for more information.

Be careful with student loans. So many young people and not-so-young people are saddled with large student-loan debt for years after they graduate. Learn more about the interest rate, fees and your repayment options before you take out any student loans. The balance of some federal student loans, for example, will be forgiven after you've worked for 10 years in certain public sector careers. See the Department of Education Student Aid page for more information about student loans and repayment options. For more information about paying down college loans, see the College Debt Checklist. (The new tax law did not include the proposal to eliminate the deduction of student loan interest. Qualifying taxpayers can deduct up to $2,500 of interest each year, even if they don't itemize deductions.)

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