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From the Chillicothe Gazette
As summer begins to descend into autumn and children return to school, you will no doubt see an increase in your credit card bills and out-of-pocket spending. August is a time to purchase pencils, folders and other supplies as well as update the wardrobes of returning scholars. However, these expenditures feel small compared to the task of paying for a college education.
The average tuition at a four-year public university in Ohio is $8,553 — almost twice the national average. A private college costs even more, at an average of $22,218. Financial aid offices expect the students’ families to shoulder much of this burden and ask you to use the Free Application for Federal Student Aid to calculate an Expected Family Contribution based on the income and assets of the parents of each student who is unmarried and under the age of 25. You may choose not to put that amount toward your child’s tuition, but a student will only receive financial aid up to limits calculated from your response to that application. Some schools may take account of very special circumstances such as an unforeseen illness or job loss, but that is rare. Typically, you and your child will have to find ways to finance the rest of the cost.
Right now, two-thirds of undergraduates leave school with an average of about $17,000 in student loans. At that level, interest rates add up to about $550 each year.
To help your child avoid taking on debt to receive a college degree, start saving today. There are many avenues for you to begin investing in your child's education. Remember that different investments have various benefits and risks. You may want to do your own research or consult with a financial planner to find out what will be right for you depending on your child's age and educational goals.
Ohio offers a 529 college savings plan with tax benefits and no enrollment fees. The money you put in can be invested in several ways, ranging from certificates of deposits to bonds and stocks. However, depending on the type of investment you choose, there may be no guarantee that your principal is secure. The money you invest in this account must be used for approved educational expenses or there will be penalties.The federal Coverdell Education Savings Account is another option. It is similar to an Individual Retirement Account. You may contribute up to $2,000 a year in pre-tax dollars to the account (and deduct that amount off your income taxes) and you have a nearly unlimited choice of investments. These accounts are a bit more flexible: if not used for educational expenses, the child named as the beneficiary may receive the proceeds when he or she turns 30 years old.
Another choice is to put the money in traditional savings and investment vehicles. There are no tax benefits, but there is also no contribution limit and no restrictions on how or when the money may be used.
Ask your children to begin contributing, or to set up their own savings plan, when they are old enough to earn their own money. It may motivate them to work harder and be more careful with their spending so they can avoid being burdened later with debt.
Also encourage them to seek out scholarships. Many obscure scholarships are available that go unused each year. Your child’s guidance counselor should have suggestions and there are many free Web sites that list available scholarship opportunities. But please note: you should never have to pay anyone to learn about or apply for scholarships.
Few investments pay off as well as a college degree. Long after your son or daughter forgets you rented a prom limo or sent them to Florida for spring break, they will appreciate their financial obligations are lighter because you helped them find a way to pay the high price of a college education.
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