College with Little Savings

If you started saving for a child’s college education later than planned, there are still a few things you can do to help lessen the financial load.

Be Realistic
Sit down with your future college student and discuss real alternatives. Maybe paying $50,000 a year for school is out, but community college or a moderately priced state college are good alternatives — especially for the core subjects most students must pass to graduate.

Find Free Money
Depending on your family income and expected financial contribution (used by most colleges to calculate aid), you could qualify for government or private grants. In most cases, you’ll need to fill out the Free Application for Federal Student Aid (FAFSA) to begin the process.

Every little bit helps, so don’t forget to scour local volunteer organizations like Rotary and Kiwanis clubs for small scholarships. Labor unions and professional associations generally offer scholarships to local students, too. Many employers also have scholarship programs, accounting for 13 percent of grant money in 2016-2017, according to College Board.

Research free money opportunities when considering colleges. Around 47 percent of grants come directly from colleges, according to College Board.

Claim Tax Credits
You could also receive income tax credits via the American Opportunity Tax Credit (AOTC) and the Lifetime Learning Credit (LLC). You can’t claim both credits in the same year, and other rules and qualifications apply.

Borrow with Caution
Some parents consider taking loans from their permanent life insurance policies and 401(k) plans to help fund a child’s college costs. Both come with cautions. Life insurance loans may reduce the policy’s cash value and death benefit, while taking money from your 401(k) could leave you short of your retirement goal.

SAVE!
Even if you don’t have a dime saved as your child begins college, you still have three years to save up for senior year and two years to save for junior year. Consider saving via the Coverdell Education Savings Account (ESA), which is income-qualified, and a 529 plan, which allows you to save large amounts to use for qualified education expenses. Talk to a financial advisor to learn more.