Child going to college? How to preserve your financial future - News: On Air. Online. On Demand.

Child going to college? How to preserve your financial future

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By Andrew Housser

This time of year, high school seniors are receiving college acceptance letters. Juniors, sophomores and even freshmen are thinking about where to apply when their time comes. For these college-bound students, excitement lies ahead – along with big bills. In fact, the average college graduate owes $28,000 in student loans. Some owe much more. Fortunately, advance planning can minimize the financial drain. Here’s how to get started.

1. Save for college early – and keep saving. In many states, families can save for college using a 529 plan. This also is called a qualified tuition plan. For most contributions, you will not have to pay federal tax. The requirement is that you use the money to pay for qualifying education expenses. Some states also exclude contributions from state tax. It is best if families start saving early on, but they usually can invest in these plans throughout a student’s education.

2. Fill out the FAFSA. Every student should complete the Free Application for Federal Student Aid (FAFSA). At a minimum, this form can help students qualify for lower-interest federally sponsored student loans. Many grants and scholarships require a completed FAFSA.

3. Talk with your child about financial realities. Many families find it helpful to meet with a financial advisor to discuss college financial planning. Some advisors recommend teens attend this meeting. Be honest with your child about college prospects. Talk clearly about costs, and how much you and your family will be able to contribute. Discuss whether (and how much) students will need to work. Also talk about options such as living at home, or attending community college and then transferring to a four-year institution. For some, these alternatives can save thousands of dollars.

4. Strongly consider institutions that are not for-profit. A recently released study shows lower-income students have a harder time repaying student loans than middle-class students. This is especially true if students attend for-profit colleges. Graduates of two- and four-year public and private colleges have better prospects. Students from these schools are more likely to improve their economic condition and repay their loans after graduation.

5. Keep up the scholarship hunt. Students can look for scholarship opportunities until they graduate. Online sources such as and the U.S. Department of Education offer lists of scholarships. Even a small award makes a difference. Also talk with local organizations. Many professional groups, employers and businesses offer grants to students.

6. Ask for more if you need it. If a college’s financial aid offer is not quite enough, contact the school’s financial aid administrator. Explain your circumstances clearly and concisely. It is possible that the aid officer might be able to help you locate additional resources.

7. Avoid credit cards. The CARD Act of 2009 requires credit card borrowers to have a co-signer if they are under age 21. While credit cards can be effective borrowing tools, they also add to debt problems a student or new graduate may face. Even after age 21, the best policy for a college student usually is to pay for expenses using only cash or a debit card. Save credit cards until the student has obtained secure, paid employment.

8. Do not sacrifice retirement savings or debt repayment for college. Parents should not skip retirement account savings in favor of paying for college. Although it may not be desirable, you can borrow to pay for college. You cannot borrow money to finance your retirement. Similarly, it is unwise to borrow to repay existing debt. Instead, make maximum contributions to your retirement savings before paying for a child’s college education.

Supporting higher education could help secure your child’s financial future. Your son or daughter will likely earn more throughout a chosen career with a college degree. Their prospects also are better if they do not borrow excessively and avoid credit card debt while they are getting an education. Together, you can make this goal a reality.

Andrew Housser is a co-founder and CEO of, a free one-stop online portal where consumers can educate themselves about personal finance issues and compare financial products and services. He also is co-CEO of Freedom Financial Network, LLC providing comprehensive consumer credit advocacy and debt relief services. Housser holds a Master of Business Administration degree from Stanford University and Bachelor of Arts degree from Dartmouth College.
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