It’s back-to-school time, and if you have a child starting or returning to college, no doubt tuition costs are on your mind. Hopefully, you’ve been saving up for years, but even if you haven’t, here are 10 tips and tricks for minimizing costs and avoiding expensive mistakes.
If your child is applying for federal loans or grants, a Free Application for Federal Student Aid (FAFSA) must be completed each year of college. Even if you don’t think you’d qualify for federal aid, it’s worth it for college students and their parents to complete the FAFSA, because schools often use the information for other forms of aid.
So, if your child has not done so yet, work together to renew their FAFSA. See the Federal Student Aid website for deadlines. It’s important to note that many states and colleges have earlier deadlines for applying for state or institutional financial aid. Visit your state higher education agency's website for more information.
Explore grant and scholarship opportunities to help pay for college. Every dollar counts. And no, scholarships aren't just for students with the best grades and test scores. There are plenty of unique scholarships out there — for being tall or being vegetarian, for example.
Applying for national scholarships is definitely worth it, but start with local scholarships, as these will be less competitive. You can find scholarship opportunities through college or affiliation sites (e.g., veterans, firefighters, church organizations), as well as reputable websites like Scholarship Search by Sallie or College Board's scholarship site.
Don’t assume you won’t qualify for aid or low-cost loans. Many assets, like homes and retirement accounts, are not counted in the aid/loan calculation. If you have other children in college, that might also lower your expected contribution. It’s worth applying to find out.
Make sure to document qualified education expenses if utilizing college saving plans (e.g., 529 plans or Education Savings Accounts) or IRAs to pay for college.
Remember that withdrawals from qualified education accounts and IRAs used to pay for qualified expenses must be made in the year the expense is incurred. Withdrawals made in a different year are considered non-qualified withdrawals subject to taxes and penalties.
Work with your child to set a budget and strongly encourage them to stick with it. A good place to start is by using the new 60/30/10 budgeting method. When using this method, 60% of your monthly income is allocated toward essential expenses, such as gas between school and home, utilities, groceries and rent. Thirty percent of your income will go toward discretionary spending, such as shopping or dining out, and the final 10% is either put in savings or used to pay off high-interest debt.
Using a defined budgeting method can be a simple way to control your child's spending. If your child already has credit cards, discuss the importance of responsible usage. You can even set a rule where if your child uses a credit card for a discretionary expense, they’re required to save the same amount in a savings account.
Also, discuss the negative impact of high-interest debt.
According to Best Colleges, in 2022-2023, the average college student spent $285 on course materials including books. That's a lot of cash for books you'll likely use for only one semester. Instead of paying full price, purchase used books and classroom materials to save money. Most campuses have online sites for the sale/exchange of used books and materials. You can also save by opting for eBooks instead of physical copies.
According to Market Watch, the average cost of a parking pass across the 100 largest colleges in the U.S. is $510 per year. Not to mention gas, maintenance and auto insurance costs. Biking to class can be a more affordable way to travel for college students.
Have your child request money to fund their studies or campus bookstore gift cards from family/friends for holidays and birthdays.
Have your student consider applying for an on-campus job. Certain jobs, such as note-taking for students with disabilities for classes your child is already enrolled in, can allow your child to earn extra money without affecting their studies.
Have dependent children save receipts for any medical expenses that may be reimbursable through a health flexible spending account (FSA) or deductible on your tax return.
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This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.
