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Recession tips: Planning for college tuition during recession:
I. For students who are applying to college in the current recession:
Students who are considering applying to college during the current recession are faced
with many challenges. Cost of education has risen in recent years. Many believe and predict
that tuition cost will continue to rise. Loans are harder and receiving financial aid and
scholarships are more difficult than ever due to the fact that most educational institutions
have suffered huge losses in their endowments, not to mention the fact that given the
economic challenges facing many families, more and more students apply for scholarship.
However, there are ways to make college more affordable in the current economic
environment.
II. For parents who want to save for their children education:
Parent who have children still in school have time to prepare. Prioritize your savings and
make a plan. It is also a good idea to start talking to your children. Explain the importance
of education in their lives and your current financial situation. Involve them in your plan by
cutting the spending on less important stuff.
Consider a choice between opening a separate saving account for your child or a 529
college saving plan. There is a huge difference between two. A 529 college saving plan
provides a lot of advantages such as 1) potential state income tax deduction for all or part
of the contributions of the donor, 2) principal grows tax-deferred and distributions for the
beneficiary's college costs are exempt from tax, 3) control of the account by parents, 4)
easy way to save for children’s college expenses, 5) assets are not counted as part of the
parents’ gross estate, thereby potentially lowering the estate tax.
However, note that 529 plans lock the family fund into spending the money only for
education. If money is withdrawn for other purposes, there will be taxation as well as an
additional 10% penalty. In some cases, 529 plans may also affect eligibility for financial
loans.
Some financial advisers also suggest buying a combination of stocks and bonds (more
heavily stocks) for your children during the times when stocks are undervalued and there is
no need for the money for the next few years.
Finally as always, talk to professional advisors.
I. For students who are applying to college in the current recession:
Students who are considering applying to college during the current recession are faced
with many challenges. Cost of education has risen in recent years. Many believe and predict
that tuition cost will continue to rise. Loans are harder and receiving financial aid and
scholarships are more difficult than ever due to the fact that most educational institutions
have suffered huge losses in their endowments, not to mention the fact that given the
economic challenges facing many families, more and more students apply for scholarship.
However, there are ways to make college more affordable in the current economic
environment.
- Public universities: Public colleges and universities are generally less expensive and
in many cases as prestigious as private institutions. Attending public universities or
colleges will save you lots of money and make your college experience easier. - Part-time: Consider attending college part-time while maintaining part-time jobs that
will pay your bills and leave you with less debt. - Colleges and universities next to home: Another option is to always to choose a
college close to home can let you save a lot on rent and food. - Cost reduction: Students can save a lot prioritizing their goals and cut spending
based on their priorities. For sure, college years are supposed to be among the most
learning and fun years of life. But that can be achieved with lower budgets as well. - Save money for college: High-school students who are planning to college in few
years have time to financially prepare themselves. It may be a good idea to get a full-
time job during the summer and possibly part-time during high-school.
II. For parents who want to save for their children education:
Parent who have children still in school have time to prepare. Prioritize your savings and
make a plan. It is also a good idea to start talking to your children. Explain the importance
of education in their lives and your current financial situation. Involve them in your plan by
cutting the spending on less important stuff.
Consider a choice between opening a separate saving account for your child or a 529
college saving plan. There is a huge difference between two. A 529 college saving plan
provides a lot of advantages such as 1) potential state income tax deduction for all or part
of the contributions of the donor, 2) principal grows tax-deferred and distributions for the
beneficiary's college costs are exempt from tax, 3) control of the account by parents, 4)
easy way to save for children’s college expenses, 5) assets are not counted as part of the
parents’ gross estate, thereby potentially lowering the estate tax.
However, note that 529 plans lock the family fund into spending the money only for
education. If money is withdrawn for other purposes, there will be taxation as well as an
additional 10% penalty. In some cases, 529 plans may also affect eligibility for financial
loans.
Some financial advisers also suggest buying a combination of stocks and bonds (more
heavily stocks) for your children during the times when stocks are undervalued and there is
no need for the money for the next few years.
Finally as always, talk to professional advisors.
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