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Financing a College Education

The challenge of getting ready for college today has become a growing problem for many students and their families due to:

1. Growing enrollments and greater numbers of student applicants pressing against limited college facilities, faculty, and other resources.
2. Rising costs of attending college, including increasing tuition costs that have been growing faster than inflation, on average.
3. A tightening of available student aid sources, including fewer loan programs, tougher lender standards, and more families strapped for extra funds.
4. A tendency for college degrees to take longer to earn with the old 4-year bachelor’s degree becoming less common and 5 to 6 years becoming more the norm with new degree requirements in several fields (such as engineering, accounting, and teaching) which stretches out the cost of an education as well as its length.
5. The need to demonstrate exceptional talent both in the classroom and in extracurricular activities with many wealthier families getting professional counseling to help their children put together attractive portfolios of accomplishments in order to snap up seats at the best schools.

Costs

What does college cost today? Tuition and books, living costs, and extra fees all have been rising rapidly in the college sector much more rapidly then the rate of inflation. The best schools now run at least $20,000 a year in tuition and other costs and some much more than this. It has been estimated that not too far into this century, it may cost as much as $200,000 to complete a bachelor’s degree at some top schools. The best way to check on costs is to develop a list of your preferred schools and write or e-mail for a catalogue and an estimate of tuition, room and board, as well as other costs and fees. Usually you will want to contact the Registrar’s Office or Admissions Office and the Office of Student Financial Aid at your preferred schools. Be sure to do an independent check on living costs by consulting a local newspaper in case your son or daughter has to live off campus and you want to know about rental costs, grocery prices, and other living expenses.

Getting Started

1. Personal savings: How do you get started saving for college? The first key is to start early. Almost no amount of crash (last minute) saving can make up for getting an early start when your child is very young and steadily putting funds away until needed for college. Even if your child does not go to college, these funds can later be used for other things, such as financing a technical school education, helping to get a new business started, or for other purposes. Not long ago the U.S. Congress set up a special long-term college savings account called an Education IRA. These accounts allow you to contribute up to $500 per year for a child less than 18 years of age. While the funds contributed each year are not tax deductible, the amounts deposited grow tax free until withdrawn for qualified higher education expenses. There are limits on who may contribute based on the contributor’s adjusted gross income. For further details see IRS publication 590 which can be ordered by telephone at 800-829-3676.

2. Scholarships: Scholarships from colleges themselves, from civic organizations, from businesses, and from governmental agencies (many of these go begging for applicants and are awarded in many cases without need restrictions); indeed, each year thousands of scholarships lay on the table unused because no one was aware that they were available as noted recently in a 1999 Random House book, The Scholarship Advisor, by Chris Vuturo.

3. Gifts: Gifts from parents and relatives, which can be set aside as college savings in the name of the student (often at lower tax rates if done according to IRS rules and the Uniform Gifts to Minors Act or the Uniform Transfers to Minors Act, depending upon which law your home state adopts) until needed for a college education. However, you should get sound tax advice on such gifts as they are usually irrevocable. Related to this source of college funding are 529 Plans with tax-free growth of earnings until withdrawn and paid to accredited colleges, universities, and technical educational institutions.

4. Loans: Loans from private and public lending institutions (including Stafford, Perkins, SLS, and PLUS loans through the U.S. Department of Education) and student loans from banks, credit unions, and other loans (often backed by government guarantee programs).

5. Jobs: Getting a part-time job for students during summers or part-time jobs during semesters or school terms (including campus work-study programs.

6. Tuition: Tuition prepayment programs that have been started in more than 300 states and by many colleges themselves and private lenders that allow you to make contributions to a fund and often freeze the cost of college entrance as long as you continue to make payments into the fund. These plans are often tax deferred and, if used for qualified college expenses, may result in tax credits.

7. Time: Finding ways to reduce the time needed to secure a degree (including counseling and planning in high school) to choose the right field (delays often stretch college time out when students continually switch majors and have to take extra courses and enroll for extra semesters).

8. Tests: Encourage your student to try to test out of some college courses by taking advance placement tests, thereby saving valuable time for those courses that move you faster toward your desired goal.

9. Home Equity Loans: Growing use of home-equity loans which permit parents or other relatives to pledge their home behind a college loan (though this deserves very careful scrutiny since the parents or relatives involved could lose their home if the loan is not repaid).

Special Notice

Remember that needs tests often apply to scholarships and school assistance packages, but not usually to loans. So that even families whose reported income does not allow them to qualify for financial assistance can often qualify for student loans. It is also important to remember you can often negotiate a better deal for your child and prospective college student even after a college or university has sent you a concrete aid package. If a school makes your student an offer and you receive a better one from another school, you can frequently negotiate for more help from the school you prefer. Be prepared, however, to document the fact that a better offer was received.

Changing Circumstances

Keep in mind that family circumstances may change and may result in qualification for more assistance. Family illness, loss of a job, divorce, or other adverse developments can change your family’s financial profile, making your student eligible for more aid.

Timing

Recall that May 1st is an unofficial deadline for acceptance of many college offers. Do not miss whatever deadline the college of your choice imposes and lose out unnecessarily, however.

Opportunity

Remember too that the best students are pursued first and when they turn schools down (often at the last minute) this may open up an opportunity for your child. Many good offers go begging when students expected to show up at a particular college simply do not appear.

Self Improvement

Can you improve your chances of getting into college? Yes, and in many useful ways, including:

1. Start in your first year of high school planning and working with a college counselor.
2. Work hard at challenging courses to show you can do college work.
3. Pay close attention to your class rank and work to raise it as many states guarantee admission into state-supported schools to those in the top quarter or top 10% (or some other dividing line) of their high school graduating class.
4. Start early to consider admission requirements of the schools of your choice and get a catalogue or list of their requirements early so that, if necessary, you will have time to make room in your high school coursework and activities to enhance your chances for success.
Contact the College Board, 45 Columbus Avenue, New York, NY 10023 for additional help in getting organized and focused. 5. Start at least as early as a high-school junior applying for scholarships and aid packages by getting the necessary forms and filing them out. Set up a filing system so you can keep track of the forms you have and which ones still need work to improve your chances.
6. If it does not work out at first at the school of your choice, think about enrolling in a local or nearby college or junior college and do as well as you can there to get top grades and strengthen your future financial position.

Still Cannot Get In?

College entrance still eludes me: What else can I do? So many people have had the prospect of college pounded into their head so strongly that they are unwilling to consider anything else until forced to do so. However, the truth is that many satisfying and financially rewarding careers go begging each year that do not require a four-year or advanced college degree. While no one knows for sure what fields will be in demand in future years, the U.S. Department of Education and the Department of Labor often publish lists of careers they believe will be in heavy demand in the years ahead and some are excellent opportunities.

Recent examples of career areas expected to do well include such fields as alcohol and drug counselors, air traffic controllers, biomedical technicians, property management specialists, dental technicians, animal health technicians, engineering technicians, respiratory therapists, computer graphics specialists and those skilled in computer repair and maintenance, chefs, court reporters, dieticians, health inspectors, physical therapy specialists, fashion and home designers, laser and optical technicians, legal assistants, radio and television technicians, equipment operators, flight assistants, medical technicians and office managers, plumbers, travel service managers, welders and tool and die makers, turf managers and water quality specialists.

Our society is changing rapidly with an aging population and new information technologies are transforming products and services and how they are delivered and tracked. These sweeping changes offer fine career opportunities for those who recognize the need and make an effort to learn as much as possible about a growing business or field. The result can be a rewarding and satisfying career for many people who may never see the inside of a college classroom. College degrees offer no guarantees and many college graduates wind up in unemployment lines or doing something they were not expected to do. Success in college does not necessarily mean success during your working years.