How to Prepare for College Financing

In order to properly prepare for college financing, the parents and student need to be actively involved in the process. College is increasingly expensive, and it takes a lot of preparation to be ready for paying that college tuition. Between loans, grants, scholarships and savings, there are many options to pay for school, and with early preparation, you can be sure to have all of these available to you.

Early Savings

The best way to save for college is to start early. Regardless of the type of savings account you are using, time is on your side. Some parents begin saving for their child's future even before he is born. When your child is very young, a great gift from family and friends for birthdays and holidays is cash and savings bonds. Encourage these gifts instead of countless toys.

529 Plans

For a good place to keep those college funds while they are growing, look into a 529 plan. Most states have them and even offer tax breaks for contributing to them. The earnings can be withdrawn tax-free. The catch is that the money can be used only for higher education. If your child does not go to college, you can gift the account to a grandchild or other relative. It is important to keep the account in the parent's name and not the child's. Having assets will hinder a child's ability to receive grants and work study.

Student Loans

If you anticipate the need for student loans, then you will need to complete a Free Application for Federal Student Aid, or a FAFSA. The student can complete this with some help from the parents. The FAFSA will ask for personal information like Social Security numbers, income, assets and copies of tax returns. This form will also determine eligibility for grants and work study programs.

Private Loans/PLUS Loans

Private loans are used in addition to federal loans in order to receive enough funds to cover the costs. These have a higher rate and should not be the first line of financing. If you need private loans, you will apply directly through a bank or credit union. To prepare for your application, you should make sure your credit score is good in order to get a better rate.

Scholarships

If you believe that you will qualify for scholarships, it is important to complete the applications in the student's senior year of high school. For institutional scholarships, you can apply directly to the college the student will be attending. Private scholarships can be found that may apply to an interest or special talent the student has.

Student Contributions

The student should try to contribute to college financing by working seasonal or part-time jobs. The best way for a student to help is by doing well and getting good grades to put him in a a position for scholarships.


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