Education: How to Pay for the Privilege of Learning
the pursuit of knowledge is among the most worthy of goals, the
cost of learning in a formal institution can be formidable. Don't,
however, let the cost deter you. There are plenty of ways to finance
a savings plan. Whether your first class begins in six
months or six years, starting a savings plan now will reduce the
total amount you may need to borrow. If you have a year to save
and are able to set aside $100 per month, you'd have $1200 to
go toward tuition and materials - far better than having to repay
that same sum if you borrowed it.
your assets. If you have excess cash set aside for emergencies,
funding your education is a smart use for the remainder. Consider
selling property you don't use or need, and peruse your portfolio
for investments you would be willing to liquidate. (Keep in mind
that parting with assets will likely trigger a tax event.)
option is to use retirement savings. You can extract
funds penalty-free from traditional and Roth IRAs if the money
is for higher education expenses. Have a tax-deferred, employer-sponsored
retirement plan? You can borrow up to 50 percent of your savings
(as much as $50,000), usually at the prime interest rate plus
one percent. But consider these options carefully. Not only are
there many restrictions, this is your retirement we're talking
about - money you will need when you are older and can't or don't
want to work.
have an additional source of low interest, easily attainable cash
for educational expenses: the equity amassed in your home. As
with retirement money, using home equity should be done with the
utmost prudence. If you can't repay the loan, your residence is
free money. Want money you never have to repay? Look
into grants and scholarships. Grants are given based on economic
need, and scholarships are generally awarded on merit. Your school
will provide information on what may be available to you, but
also explore FastWeb.com, Collegeboard.com, and Wiredscholar.com
for more information.
better, your employer may foot the bill for your education.
Many companies offer tuition reimbursement plans for those attending
undergraduate, graduate, and professional schools. Each plan is
different, but most reimburse all or a portion of an employee's
tuition, books, and related fees. Of course, your company will
want to reap the benefit of all that schooling, so plans typically
require you to stay on the job for a specific amount of time after
you've completed the coursework.
student loans. Student loans are a common way to pay
for tuition and school expenses. With them, you have access to
large amounts of cash, very low interest rates, and long, flexible
repayment periods. They are readily available and you do not need
good credit to take advantage of them. Loans come subsidized,
where the federal government pays the accumulated interest while
you are in school and in a grace and deferment period, and non-subsidized,
where interest accumulates as soon as the loan is granted. Whatever
type of loan you are eligible for, resist the urge to borrow more
than you need. Paying back tens of thousands of dollars isn't
the tax benefits. The government wants you to expand
your intellectual horizons! Really. First, you can deduct student
loan interest, and second, you can reduce your income tax liability
on a dollar-for-dollar basis with tax credits. The HOPE Scholarship
credit is for a student's first two years of undergraduate education,
and the Lifetime Learning Credit is for college Juniors, Seniors,
Graduate Students and working Americans who are taking classes
to upgrade their skills. To find out how tax deductions and credits
can work in your favor, visit the IRS's website: www.irs.gov.
Inspired to pick up a course catalogue? Good. Because while paying
for higher learning may indeed be financially challenging, an
investment in education has a guaranteed return - knowledge.
Tips to Plan For Your Child's College Education
to set money aside now.
your child to save regularly, borrow wisely, and shop sensibly.
Apply for grants even if you think your child isn't eligible
- many are, but don't know it.
Determine how much money you'll need to save with a college
planning calculator. SallieMae has a good one: www.salliemae.com.
up an Education IRA or 529 College Plan.
prepaying tuitions costs with a prepaid tuition plan.
EE U.S. Savings Bonds for tax advantaged savings.
your child's education simultaneously with, not instead of,
your child's financial aid package early. Loan and grant delays
are not unheard of.
hiring a financial aid consultant - most people can get all
the help and information they need for free by doing a little