10 Strategies to Manage & Pay for College and Higher Education

For many families, financing a college education is a major financial challenge. But despite the increasing costs of higher education, strategic planning and saving can mitigate the financial burden so that students can pursue their academic and career goals without taking on overwhelming debt. Here, we’ll explore various strategies for paying higher education costs, breaking down several tried-and-true traditional savings methods alongside some unconventional tactics.

10 strategies for planning and preparing for college education costs:

1. Start Saving Early
2. Open a 529 College Savings Plan
3. Apply for Scholarships and Grants
4. Budget and Manage Costs
5. Utilize Home Equity Lines of Credit (HELOCs)
6. Consider Personal Loans Strategically
7. Encourage Earning College Credits Early
8. Utilize Employer Benefits
9. Understand Financial Aid Options
10. Teach Financial Responsibility

1. Start Saving Early

One of the most effective ways to prepare for the cost of college is to start saving as early on in your child’s life as you can, preferably starting when they are born. That’s because the power of compound interest can significantly boost your savings.

• Example: If you saved $100 per month from your child’s birth and earn an average annual return of 6%, you would accumulate about $38,000 by the time your child turns 18.

Starting early not only maximizes your savings through compound interest but also allows you to make smaller contributions over time, making the process less financially strenuous. Plus, your child will appreciate that you started saving before they could even say “college.”

2. Open a 529 College Savings Plan

A 529 plan is a state-sponsored investment account designed to save for college expenses. These plans offer several benefits such as:

• Tax Advantages*: Contributions grow tax-free, and withdrawals for qualified education expenses are not taxed.
• High Contribution Limits: Many 529 plans allow for substantial contributions, often over $300,000.
• Flexibility: Funds can be transferred to another beneficiary if the original recipient decides not to attend college.
• Minimal Impact on Financial Aid: 529 funds are considered parental assets for financial aid purposes, which has a relatively modest impact on need-based aid eligibility.

Not sure where to start with a college savings account? Consider consulting with a financial advisor for personalized advice and guidance tailored to your financial situation and goals.

*GSB does not provide tax advice. Please consult a tax professional for tax-related questions.

3. Apply for Scholarships and Grants

Money from scholarships and grants can significantly reduce the net cost of going to college. Here are some ideas to help your search for funding:

• High School Counselors: Often have information on local scholarships.
• Online Platforms: Websites like College Board’s Scholarship Search can help you find available national scholarships.
• Community and Employer Grants: Local businesses, organizations, and employers may offer scholarships or grants.

Encourage your child to apply for as many scholarships as possible. Even small amounts add up and can make a big difference.

4. Budget and Manage Costs

Effective budgeting and money management are crucial components of college planning. Consider these options to keep total higher education costs down as much as possible:

• Community College: Starting at a community college and transferring to a four-year institution reduces tuition costs.
• In-State Tuition: Public universities in your state often offer lower tuition rates for residents.
• Living Arrangements: Consider less expensive living options, such as living at home, sharing an apartment, or becoming a Resident Assistant to reduce room and board costs.

5. Utilize Home Equity Lines of Credit (HELOCs)

A Home Equity Line of Credit (HELOC) can be a viable option for funding college expenses for the following reasons:

• Lower Interest Rates: HELOCs usually come with lower interest rates compared to personal loans or credit cards.
• Tax Deductibility: In some cases, the interest paid on a HELOC may be tax-deductible if used for qualified education expenses.
• Flexibility: HELOCs offer flexible borrowing and repayment options.

However, there are risks to consider as well. Using a HELOC means putting your home at risk – and that’s not to be taken lightly! If you cannot make the payments, you could lose your home, so this option requires careful consideration and financial discipline.

6. Consider Personal Loans Strategically

While not the first choice, personal loans can bridge funding gaps for college expenses. Here are a few considerations:

• Unsecured Loans: These loans do not require collateral, making them accessible if you don’t want to put assets at risk.
• Fixed Interest Rates: Many personal loans have fixed interest rates, providing predictable monthly payments.

Like HELOCs, there are drawbacks to be aware of when it comes to this type of loan. Personal loans often come with higher interest rates compared to federal student loans or HELOCs, and repayment usually begins immediately, adding to your financial obligations. Be sure to give this type of loan careful consideration and only utilize when you have a manageable payoff plan.

7. Encourage Earning College Credits Early

Dual enrollment and AP classes can help students earn college credits while still in high school, reducing the time and money needed to earn a degree.

• Savings Potential: Earning a year’s worth of college credits in high school can save a year’s worth of tuition, room, and board costs.

Encourage your child to earn college credits early if it makes sense for them. It could end up saving them some financial burden in the long run. Plus, who wouldn’t want to start their freshman year as a sophomore? Instant upgrade!

8. Utilize Employer Benefits

Explore if your employer offers education benefits like:

• Tuition Reimbursement: Employers may reimburse employees for tuition costs for relevant courses.
• Scholarships for Employees’ Children: Some employers provide scholarships for employees’ children attending college.

9. Understand Financial Aid Options

Being informed about financial aid can help you plan better. Look into options such as:

• FAFSA: Submitting the Free Application for Federal Student Aid (FAFSA) is essential for determining eligibility for federal grants, loans, and work-study programs.
• Federal Student Loans: These loans generally offer lower interest rates and more flexible repayment options than private loans.
• Work-Study Programs: Provide part-time jobs for students with financial need, helping them earn money to offset education costs.

10. Teach Financial Responsibility

Ensuring your child understands financial responsibility prepares them for managing their college finances. Start with:

• Encouraging Part-Time Work: Having your child work part-time during high school or college can help offset some expenses like a laptop computer, textbooks and other school supplies. It also teaches valuable life skills in preparation for entering the workforce.
• Budgeting: Teach them how to create and follow a budget.
• Credit Awareness: Educate them about maintaining good credit and the risks of excessive debt.

Bonus Tip:  To help kids and teens get started with financial literacy early, GSB has partnered with Greenlight, the debit card and money app for kids and teens. Parents can teach their kids smart money habits with flexible spending controls, automated allowance for chores, and savings goals, all from the Greenlight app. The best part is Greenlight is available to GSB customers for free. We call that a win-win!

Plan Ahead To Save On College Costs

Saving for higher education costs requires a multifaceted, disciplined approach. By starting early, focusing on saving, and managing overall costs, families can successfully navigate this financial challenge. Tailor these strategies to fit your unique circumstances and long-term financial goals, ensuring that the dream of a college education becomes a reality without overwhelming debt. With careful planning and proactive measures, you and your child will be well-prepared for this exciting season of life.