It is quite interesting to note that student loan debt has exceeded the net worth of credit card debt in USA! Most parents search for strategies, to pay for college, that would save them from the painful and strenuous form of debt. If you are doing everything to stay away from student loans, consider yourself lucky. This article will help you reach your goal at a faster rate. As you build a plan towards college funding solutions, you must have the dos and don’ts discussed in this article in mind!
Don’t Save using Insurance Programs
First of all, don’t save for higher education using private insurance providers – never save funds in customized programs like the Gerber Grow Up Plan. These are whole life insurance policies with very poor schemes for higher education. Moreover, the Gerber Grow Up Plan is an expensive form of support. May it be the phase of application or the monthly payments, the plan is remarkably expensive.
Do Invest in Educational accounts
Secondly, you should invest money in an Educational Savings Bank Account. Technically, these accounts are also known as Education IRA. If your yearly income is 200,000 USD or lesser, you can save up to 2000 USD annually. Education Savings Accounts are void of tax. However, you should use this money only for educational expenses.
Don’t Rely on savings Bonds
Never save for higher education in savings bonds. Though bonds are regarded as safe and reliable, they are risky as market commodities and stocks. Savings bonds will not be sufficient to cope up with the price increase of higher education. According to experts, college tuition increases by nearly 8% every year!
Do Use ESA
To support your child’s college education, you must use your ESA. Potential investors state that the option has high rates of return. In the longer run, ESA will increase the net worth of your funds by 12%.
Don’t Pre Pay Tuition
Have you ever come across pre paid tuition? If not, consider yourself lucky! When you make pre-payments, you must check if the rate of inflation is equivalent to your investment or not. Generally, pre-paid college tuition fee will give you a return of 8% every year. Thus, pre-payments might not allow you to cover the program’s actual tuition fee.
Do start a 529 Plan
Sometimes, you should think of starting a special 529 Plan. The plan will definitely help you if your income is high. Similarly, the 529 Plan will be useful if you have to save lots of cash for higher education. Nevertheless, remember to choose your plan wisely. Some plans are no better than Insurance policies or pre paid tuition schemes. For instance, you should make sure the 529 Plan is flexible and affordable. Also, be very careful with this kind of fund – carefully analyse everything regarding the investment and the conditions you pick!
Do Use Grants & Scholarships
Last but certainly not least, you must apply for educational grants and scholarships. There are plenty of unclaimed scholarships out there! If you are alert and careful, you will have the wit to make use of these bucks!