7 Things to Keep in Mind When Deciding to Pay for Your Kid’s College Tuition

Parents approach college tuition savings opportunities to find the best choice for their child. Paying the tuition takes the burden off their child and allows the child to stay focused on their studies instead of covering all related costs. It is a proven fact that students achieve more when they aren’t stressed over how they are going to pay for college. Parents who want to take on the task of covering their child’s college expenses review the 7 things to keep in mind when deciding to pay for your kid’s college tuition.

1. Using Financial Aid

Financial aid is used most often to pay for college tuition. Your student applies for financial aid through the US Department of Education. It is necessary for you to provide a copy of your most recent tax return to qualify for the financial aid payments. Once the agency receives the application and tax documents, it determines how much financial aid is available to your student. You receive a report detailing how much your student receives each quarter or semester. Your student gives the report to the financial aid officer at their chosen university or college.

The student is required to maintain at least a C average throughout their college program to remain eligible for financial aid. If the student fails too many classes, it is necessary for them to transfer to a new college and increase their grade point average. Some students will have to pay for their college tuition out of pocket until they re-establish eligibility for federal student aid.

By choosing financial aid, your student has access to federal student loans and Pell Grants according to your income from the previous year. It is recommended that you review the full amount provided and monitor how your student uses the funds. There is often an outstanding balance after tuition is deducted from the financial aid and a stipend check is sent to your student. To keep the balance on the loans at a more affordable balance, it is recommended that you place the stipend money in a savings account for repaying the loan. You could also start repaying the student loans after the end of the first quarter or semester.

The mismanagement of financial aid funds could lead to financial hardships in the future. After your student graduates, they have a grace period during which they aren’t required to make any loan payments. However, once the grace period is over, the loans go into repayment mode. In most cases, the starting payments are higher than average, and the loans are split into two or more accounts. If your student faces difficulties paying back the loans, it is recommended you review deferments, forbearance, or income-based payment programs. If the loans become too overwhelming, it is possible to use a private lender to consolidate the loans and place them into one account while paying one monthly payment. Parents learn more about debt consolidation by visiting National Debt Relief now.

2. Using Your Own Income

Prepaying for college allows parents to use their own income to start saving for college tuition payments at any time. Parents who want their child to attend a specific college could start saving when the child is young. It is recommended that the parents identify the current tuition rate and start saving deposits of any size as soon as possible. The programs allow parents to save for college tuition at an earlier time and avoid increases in tuition costs when the child graduates from high school.

The college also reserves the student’s place when the parent has paid the required tuition in full. This allows the student to attend without the fear of looming student loans in the future. Some tax savings are possible for paying tuition earlier, too. Some programs allow the parents to pay for tuition and deduct a portion of the college expenses on their income tax return. The parents could also receive up to $500 in tax credits for their contributions each year when filing their taxes.

3. 529 College Savings Plans

529 College Savings Plans allow parents to contribute a predetermined amount each year into the plan. The earlier the parent starts the more likely they will have enough money by the time their child starts college. All contributions are made with tax-free funds. Parents can set up the plans through their employer and have the payments sent to the plan before their wages are taxed. However, the plans have restrictions for how much the parent can contribute each year, and stipulations apply for how the child uses the money in the future as it is withdrawn from the account. Taxes are applied to the funds when the student withdraws it for college.

4. If You Work at a College

Faculty and staff that work at local colleges receive invaluable perks through their employers. Once the individual is a full-time employee at the college, they might have access to plans in which the children of the staff receive free college degree programs. The perk is available to the student only if their parent continues to work for the college according to the stipulations of the program. If the parent is fired or quits working for any reason, their child is no longer eligible for free tuition.

Facility members who have established tenure are more likely to maintain this status and cover college expenses for their children more effectively. Under the circumstances, the teacher or administrator could retire and retain the benefits for their family. The programs also cover spouses who want to attend and complete a college degree program.

5. Scholarships and Grants are Available

Scholarships and grants are available to students according to their academic achievements. High schools offer applications for scholarships for students with higher than average grade point averages. The participating scholarship programs announce which students will receive the scholarships just before the students graduate from high school. Grants are also available to students according to their grades and achievements in high school.

When applying for scholarships, it is vital for the parent to review the eligibility requirements for each program. They should apply for all scholarships for which their child is eligible. The fine print for the programs defines what conditions could cut off access to funds in the future. Typically, the student must achieve and maintain a specific grade point average while attending their preferred college. The student must meet all stipulations of their scholarship program or they could be denied access to the funds. Some scholarship programs require an essay to apply for the programs, and the student who has the best essay wins the highest scholarship amount.

6. GI Bill for Military Families

All military personnel earn college tuition money through the GI Bill. The duration of their service and how long the individual remains on active duty defines how much money they receive. Typically, the service member, their spouse, and their first two children receive access to the college tuition funds. The US government restricts access to the funds if the service member gets a divorce, and a divorce could prevent a former spouse from using the funds for themselves.

Some programs require children of the service member to attend a college in the state where their parent is stationed or chooses to live after they are discharged from the military. All military personnel must be discharged honorably from the military to get their GI Bill. Any dishonorable discharges cut off access to any benefits including the GI Bill that are available to military members.

7. Whole Life Insurance

Whole life insurance is beneficial for paying for college tuition and allows parents to start the insurance plans when their child is a newborn. Premiums are paid throughout the child’s life and are accessible after a few years. The insurance policies are often used as a savings plan for college tuition, and the parent could acquire any value they want based on the policies they select. However, the parent must pay the payments every month without fail until they decide to cash out the policy. After the child becomes an adult, the parent can sign the policy over to their child.

Parents could also borrow from the whole life insurance policies. A loan is provided to the policyholder whenever they need money. After the funds are accessed, the policyholder starts paying payments each month until the balance is restored. Parents can continue to borrow from the policy throughout their lives. Once the funds are withdrawn from the policy, the parents can start new policies for additional children.

Paying for college tuition requires careful planning and a keen eye for details. Parents who want to pay their child’s college tuition have several opportunities for saving money or paying the tuition directly. It is beneficial to find the best plan for the child and eliminate the stress and worry later on. After a complete evaluation, parents arrive at the best choice for covering tuition that gives them the best return on their investment.