Paying for College

Finance, Home & Family
on August 4, 2002

For your children, college can be the last wonderful stage in growing up. But for you, who pays the bills, it might be something different.

The average parents of a high schooler applying for college have saved less than half of what they need, according to a study by Sallie Mae, a company that holds $72 billion in both private and federal student loans, making it the countrys largest source of funds for higher education.

College can be a tremendous burden on both the parents and the child, says Joan M. Gruber, author of Your Money: Its a Family Affair. But there are ways to ease the pain.

Parents can:

  • Consider contributing to a college savings plan, such as a state-run 529 Plan or an Education IRA, where earnings grow tax-free, and withdrawals are tax-free if used for college costs. If your state offers it, think about using a pre-paid tuition program that allows you to pay tomorrows tuition bills at todays prices. But do your homework to make sure these plans are right for you.
  • Move assets out of your childs name. Financial aid administrators give more weight to the childs assets than the parents when deciding how much funding a student needs, so the less money in the childs name, the better.

Students can:

  • Take advanced placement classes in high school; they often count for college credit.
  • Attend a community college for a year or two, then transfer to the school of choice. Better yet, attend a nearby school and live at home. Room and board can cost as much as tuition at many schools.
  • Get a part-time job. Along with providing needed income, work helps teach students how to manage their time efficiently. Be aware, however, that studies show grades tend to dip when students work more than 20 hours a week.
  • Consider a co-op or intern program. Many universities offer programs where students can go to school for a semester and then work for a semester at a job in their field.
  • Serve your country. The Reserve Officers Training Corps (ROTC) has a scholarship program that pays tuition, fees, book costs, and a stipend in exchange for participation in drills and classes during the academic year and a four-year tour of duty following graduation. Another option is AmeriCorps, a federal program that gives educational funds in return for volunteering for community-service programs.
  • Apply for unusual scholarships. Are you left-handed? Maybe the descendent of a Confederate soldier? Scholarships are out there for you.

Literally, millions of dollars in scholarship money goes unclaimed each year because people dont realize that the opportunities exist, says Doug Brown, a financial planner for Ernst & Young in Chicago.

To find these opportunities, check with the universitys financial aid office and take a look at for unusual organizations that offer scholarships.