4 Easy Ways to Reduce College Costs and Supercharge Your Retirement
ningcontentIf you’re the parent of a high school student you may soon be faced with a very tough decision: Should you continue funding your retirement plan or apply these contributions to help pay for your child’s college education?
Many parents require additional resources to assist with college expenses and turn to the financial aid system for help. While you may be uncertain about prioritizing retirement contributions versus college expenses, the financial aid system is quite clear about how they view your retirement contributions. They feel that these contributions can be used to help pay for your child’s education and assume that you can play “catch up” with your retirement at a later point.
But before you throw your hands up in frustration and buy into their plan, let’s take a look at four ways to shave your out-of-pocket college expenses and keep your retirement contributions flowing.
How Parents Can Cut Their Child’s College Costs Now
1. Make Colleges Compete
In order to cut your child’s college costs, make colleges compete against each other during the application process. For example, if your child is applying to a private college, send your information to the big public university in the same state too – even if your child has no intention of attending.
Why?
You can create competition amongst universities by applying to:
– Colleges within the same conferences
– Public and private schools in the same state
– Institutions within the same region
This can ultimately mean big savings for you.
2. Make Sure You Have a Plan to “Unzip” Your 529 Savings Plan
Most people think, and were probably told by their advisors, that distributions from their 529 savings plans are tax free if used to pay for Qualified Educational Expenses. But what appears to be a clear-cut case isn’t always so when you’re dealing with the tax-happy trifecta of the Federal government, state governments and the IRS. So be sure to determine your Adjusted Qualified Educational Expenses prior to pulling any money out of your 529 savings plan account to prevent the ever-present taxman’s hand from reaching into your wallet.
3. Apply Early
Colleges are often under pressure to meet early deadlines for enrollment goals. To help meet these goals, some institutions will award merit scholarships to students who apply early in their senior year. This is one of the easiest ways to reduce the cost your family pays out of pocket for college. So get busy filling out college applications as soon as your child starts his or her senior year.
4. Understand the Hazards of Cash Gifts
Avoid having cash gifts made directly to the college or the student during the financial aid “base year” or any year your child applies for financial aid. Cash gifts given during this time period can result in your child losing scholarships and other forms of gift aid (which is financial aid that does not need to be repaid). In addition, it may raise the amount of money your family is expected to pay for college. Knowing how and when to receive such gifts is key to minimizing your college expenses.
Funding your retirement and paying for your child’s college expenses impacts your wallet now and into the future. So it requires extensive planning and discussion. Saving as little as $350 dollars a month in college expenses and applying those funds to your retirement could mean as much as $136,000 available to you when you retire. And, that’s with a minimal rate of return.
Follow the advice in this article and in my FREE e-monthly newsletter, “The College Savings Tip Sheet” at http://www.reduceyourcollegecosts.info and you won’t ever have to pay full price for your child’s college education. You can slash thousands from your college costs so you and your child are left with less debt after graduation. And, you’ll be able to save for your retirement at the same time
Marc Hill is a financial planner who coaches and educates families on how to dramatically reduce their college costs up to $12K or more! Now you can learn how to cut your family’s college costs and protect your retirement account with Hill’s FREE e-newsletter: “College Savings Tip Sheet.” Subscribe now for free at http://www.reduceyourcollegecosts.info & receive two FREE issues of Hill’s members-only newsletter “Affording College.”
