5 Tips on Paying for Your Kid’s College Education

These days, a child’s education is quickly becoming one of the biggest expenses you will have in your lifetime. College costs seem to be rising exponentially. It’s not uncommon for students to leave college six figures in debt. That’s like a mortgage payment, except you don’t have 30 years to pay it off (only 10!)

The question bears asking: Is a college degree worth it?

No doubt, this question keeps parents awake at night, even if your kid is still an infant. One of the best investments you can make is in yourself. Research shows that those with a college degree earn more money. What can you do to help reduce this enormous cost?

Here are some tips:

1. Put All Assets in Your Name: It’s tempting to do the opposite. However, there are a couple of big reasons not to. The first involves financial aid. If a potential student has assets in their name, it decreases their chances of getting loans and /or grants. The other is what if your kid doesn’t want to go to college. They can keep that money and buy a sports car instead, much to your chagrin.

2. Don’t Sacrifice Your Retirement: The selflessness in us wants to do this. What parent wouldn’t do everything they can to ensure their child’s future? If you do this, you’ll have less time to rebuild your nest egg. Many hope to retire within 10-20 years after their kid graduates college. Is that enough time to make up the lost principal and earnings? Conversely, your kid has 40 years of earning power ahead of them. Finally, their future is ultimately their responsibility.

3. 529 Plans: These are similar in structure to a 401K, where you get a tax deduction for contributions and earnings grow tax-free. You have flexibility with what you can use funds for, pretty much anything related to education. Each state is different so you have to do some research.

4. Choose a Practical Major: This simply means one that you can earn a living. I’m sure saving the whales, participating in drama club, or English Lit is appealing to some, but you most likely won’t find a job in any of those fields upon graduation. Choose something where there will be a market for your skills. The best majors involve math and science. You can pretty much write your own ticket in those fields.

5. Saving Money: One way to save money is buy a property and make your child the manager. You’ll get rent payments from roommates as well as the tax benefits of owning a rental property. My college roommate’s dad did this and sold once he graduated. Alternatively, have your child consider becoming an RA (Resident Assistant). They usually get room and board free. Another way to save money is going to community college for the first 2 years. You get the prerequisite courses at a much lower cost, and you’ll save on room and board since your child would commute versus living on campus.

By constructing a sound financial plan, you can help reduce the ever-expanding college costs (student debt is in the trillions!). It’s important to examine your entire financial picture when making any decisions. START EARLY, DON’T WAIT: preferably, before your kid exits the womb! Time can be your friend, or your enemy.