How to Pay for Your Child's College Without the Stress

In just one decade, the average yearly cost for tuition and fees to attend a public university will double from under $10,000 to approximately $20,000! Parents living through the lean years of putting a child through college have discovered tuition and fees are just the beginning. Add payments for room, board, books, activity extras, and clothes, and the average annual cost totals more than $30,000. If your child goes to summer school, there will be more bills to pay.

How can you make this experience more enjoyable and cope with shifting financial obligations of a college education?

GET PROFESSIONAL HELP

Before taking on debt, a consultation with a financial planner can jump-start a college funding plan tailored to your circumstances. Several saving and investment options are available. Your financial planner can help you put one or more of these in place.

Additional help might be found on income tax returns. Check with your tax preparer or use an updated income tax software program to determine the amount allowed for education costs based on your income.

START SAVING NOW

While your child is young, there is time to plan and save. If you have a teen; preparation is now. Enlist the help of your child. Saving and investing for a college education is a great opportunity to teach the value of higher education.

Whether the college experience includes an in-state or out-of-state public or private school; scholarships; or student loans; you could start with a savings account or certificates of deposit. Shop for the best interest rate before you open any account. Surprisingly, online banks are very competitive.

OPEN A 529 PLAN

When college choices have narrowed to a specific state, you might invest in a 529 Plan. This federal, qualified tuition program is a tax-free investment plan that may not require residency in that state. For example, if you live in Maine, and choose a college in Virginia, you might be able to invest in Virginia's 529 Plan. Read the fine print to learn about funding in-state or out-of-state public and private universities, refunds, possible state-to-state transfers, or penalties if your child does not go to a school in the state in which you are invested.

If you decide to use a 529 Plan, there are two options: Prepaid Tuition Plans and Education Savings Accounts.

* Prepaid Tuition Plans allow payment of in-state tuition at today's rate and are low-risk. These plans are guaranteed to match or exceed in-state inflation. The downside is that participation can be limited to state residents and may only cover tuition at public universities.

* Education Savings Accounts are investment accounts used to pay tuition at eligible public and private universities with no residency requirements. Some accounts have high contribution limits per beneficiary with no gift tax liability. The downside is that the value fluctuates with the market and your university might not be on the eligibility list.

DISCOVER WHAT'S NEXT

We can't predict real costs for higher education. We can assume that prices will continue to rise and people will continue to get smarter about how to fund a college education for their children. Watch for creative college funding and changes in tax law. Help is out there and getting easier to find.

Sources:

*How Are We Going To Pay For This, FinAidFacts.org

*Saving For College: Prepaaid Tution Plans, BabyCenter.com

*Education Savings Accounts, National Center For Policy Analysis (NCPA)