Dear College Money Guru,
I’m only 15 years old, but after watching my parents put my sister through college, I realize they’re going to need help. Since I don’t have a college fund, how can I save or put away money strictly for college?
It’s wonderful (but, alas, not too common) that you are thinking ahead and looking to save for college. Many parents struggle to afford college for their children, and your folks will appreciate anything you do to help.
The most effective way to help your parents is to make colleges want you as their student. That means taking on a challenging high school curriculum, achieving high grades, scoring well on standardized tests, such as the SAT and ACT, and becoming a leader outside the classroom in one or more activities for which you demonstrate a passion.
Most of the Ivy League schools have recently revised their aid policies and are spending more of their endowments to make college affordable for moderate-income families.
For example, if Harvard accepts you for admission, and your family income is below $180,000, your annual cost at that school will be capped at 10 percent of your family income. And Harvard is just one example.
Only a small percentage of students are able to gain admission to Ivy League and similarly endowed schools. But while less-selective colleges may not have the resources of a Harvard or Stanford, they are just as interested in attracting a diverse and high-quality group of students.
Many will offer generous grants or tuition discounts beyond the standard need-based financial aid package to students who demonstrate exceptional talents and academic prowess.
Here are some other things you can do that will help bring down the cost of college.
4 ways to bring down college costs:
- Consider a public school. Your in-state public university offers a great education at subsidized tuition prices. However, as discussed above, many private colleges will bring down their prices for the right applicants.
- Think about your goals. Start investigating the schools you are most interested in while carefully weighing academic and career goals. The wrong choice can be expensive if you later decide to transfer schools or drop out entirely.
- Enroll in advanced placement. Look into advanced placement classes at your high school. Many colleges accept AP for credits, which can reduce the time you spend in college. In some cases, you can substitute a year at a local community college for your senior year in high school.
- Research scholarships. Visit your high school counseling office or your public library. Or, search for free scholarship sites on the Internet. When the time comes to apply, you should have already developed a sound strategy for seeking out scholarship money.
With regard to saving money, my suggestion is that you open a Roth IRA and contribute as much as $5,000 per year with the unspent earnings from your job. The Roth IRA will not count against your federal financial-aid eligibility, although the school may count it in awarding institutional aid.
If you choose to do so, you can pull out your Roth IRA contributions at no tax cost to pay college expenses. However, I suggest you take loans for the first three years and wait until your senior year before tapping your Roth IRA. That way, the distributions will not have to be reported as income on your financial-aid application.
Remember that although the law allows you to tap your Roth IRA contributions to pay for college, you’ll be even better off in the long run, leaving the money untouched so it can grow for your retirement. Only use these funds for college as a last resort.
The worst mistake would be for you to keep large amounts of money in a bank account or mutual fund. The funds will be counted heavily against you in determining your eligibility for financial aid, and the interest, dividends and capital gains from your taxable investments may become subject to the expensive “kiddie tax.”
If you cannot open up a Roth IRA because you do not have job earnings, your next best options would be a 529 plan or a Coverdell education savings account. Learn more about the advantages of these vehicles at Savingforcollege.com, a Bankrate company.
To ask a question of the College Money Guru, go to the “Ask the Experts” page, and select “college financing” as the topic.
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A lot of these posts seem so boring and canned because they deal with the rote side of going to college. This stuff can be found anywhere. But the untold story about college planning hasn’t been heard quite as often. There is pain for me behind this topic. The reason I want to start a business revolving around college planning is because of my own shortsighted mistakes. Granted the tools have improved significantly since I went to college, and so has the college environment. There are some timeless truths however that can be taught, and the truth is, it is about the journey, not the destination (thanks dad, I always knew you were right, generally).
The key to success in college is different for everyone. It is impossible to say what worked for me will also work for you; it may or it may not. This is exactly the approach that most colleges and high schools take! There is a broad assumption that going to college is the BEST for everyone, and to take this deeper, the assumption is that going to a four year (Ivy) right out of high school is the best option for everyone. The truth is that it may not be.
Another fault that many students make (including me, and the heart of my pain) is in the area of finances. Often, it isn’t the frugal, basic use of student loans, but the extravagant use of student loans, car loans, credit cards, and a small private loan for “just in case”. This kind of financial pressure leads to emotional pressure which leads to mental pressure. It stifles innovation and creativity and it KILLS… ABSOLUTELY KILLS passion.
So in my journey to pursue a brighter future and a restored past, I am working hard to help lead other young men and women with me. To help young high school students discover their strengths and to discover a path to achieve their greatest passions and dreams. This is my calling. To uncover the calling of others and launch them into their future. I use MAPS because it works. Simple as that. It is the most detailed and ACCURATE tool I have ever seen.
My pain is your gain. The lessons I have learned through pain and frustration you can learn from the comfort of your living room, and then you can enjoy an earlier starting point and achieve far greater success than I ever could.
Wondering how much college is going to cost you? You can calculate tuition, living costs, student loan debt and other common college costs using these free online college calculators.
1.) CNN Money College Cost Finder
CNN Money is the perfect place for aspiring college students to begin estimating college costs. The site’s college cost calculator can find the cost of any U.S. college or university. All you have to do is type in the name of the school or search for the school by state.
2.) CollegeBoard College Cost Calculator
The CollegeBoard College Cost Calculator can help you estimate college costs in today’s dollars or supply projected costs adjusted for inflation if you do not plan on attending college immediately. Actual costs are provided for users who have a particular college in mind, and average costs are provided for users who aren’t sure which school they will attend.
3.) NY Times College Cost Calculator
This free online calculator from The New York Times can estimate the future costs of tuition, fees and room and board based on the rate at which college costs typically increase. The calculator works well for students who plan on attending college one year from now, 10 years from now or 20 years from now.
4.) FinAid College Cost Projector
The FinAid College Cost Project helps students estimate how much college tuition will cost when they are ready to enroll in a college program. The calculator uses an average inflation rate of 7% and can estimate the cost of a two-year college or a four-year college.
5.) Edwise Online Financial Planning Guide
Developed by EdFund and the University of California Los Angeles (UCLA), the EdWise Online Financial Planning Guide can help students estimate college costs, create a college budget and calculate student loan costs. The guide works best for users who have personal financial information, estimated college costs and financial aid award information.
6.) College Tuition Planner
Salary.com’s College Tuition Planner helps students estimate how much they need to save for college based on their age, college location and the duration of college programs. The planner can also estimate average costs for students who aren’t sure which school they will attend in the future.
7.) MSN Money Tuition Savings Calculator
MSN Money’s free online calculator is designed to help parents estimate the costs of college and establish a realistic savings goal. The calculator projects how fast tuition is rising and how much interest can be earned from savings accounts.
8.) Salary.com Cost of Living Calculator
This free online calculator from Salary.com helps students estimate and compare the cost of living in 300+ cities around the nation. The calculator works especially well for students who will be living off campus because it provides the salary needed to maintain your preferred standard of living.
9.) Citi Student Loan Calculator
The Citi Student Loan Calculator is an excellent tool for students who are trying to determine how much they need to borrow to cover college costs. The calculator considers everything from tuition and itemized fees to school supplies and room and board.
10.) Sallie Mae Loan Repayment Calculator
Sallie Mae’s Loan Repayment Calculator displays monthly payments as well as interest payments under various repayment plans so that students can calculate the differences and choose the best loan repayment option.
Common Mistakes To Avoid When Completing The FAFSA
The best way to complete the FAFSA is early, and online. January 1st is the soonest you can apply; remember that there are sometimes early deadlines for awards and that awards often consist of limited funding. Complete your taxes early because you’ll need that information, otherwise you can estimate the amounts from previous years and correct the amounts on the form later by going to the corrections page on the FAFSA website.
If you apply online, your application will be processed faster and will likely be more accurate because your application will be processed on the FAFSA website to catch errors. The online application also provides worksheets that will calculate amounts and enter them into the field for you. You can save and continue the FAFSA at any time online and then sign your application electronically using a personal identification number (PIN) which you can get from the Federal Student Aid PIN website.
Making mistakes on your FAFSA could delay your application and possibly make you lose out on some financial aid. The most common errors people make are listed below. As you complete the FAFSA try to avoid these errors.
- Leaving blank fields–enter a ‘0’ or ‘not applicable’ instead of leaving a blank. Too many blanks may cause miscalculations and an application rejection.
- Using commas or decimal points in numeric fields–always round to the nearest dollar.
- Listing incorrect Social Security Number or Driver’s license number–check these entries and have someone else check them too. Triple check to be sure.
- Entering the wrong federal income tax paid amount–obtain your federal income paid amount from your income tax return forms, not your W-2 form(s).
- Listing Adjusted Gross Income as equal to total income–these are not the same figure. In most cases, the AGI is larger than the total income. This mistake is particularly common.
- Listing marital status incorrectly–only write yes if you’re currently married. They want to know what you’re marital status is on the day you sign the FAFSA, or Renewal FAFSA.
- Listing parent marital status incorrectly–the custodial parent’s marital status is needed; if they’ve remarried, you’ll need the stepparent’s information too.
- Leaving the question about drug-related offenses blank–If you’re unsure about something, find out before you submit your FAFSA instead of leaving it blank. A conviction doesn’t necessarily disqualify you from getting aid.
- Forgetting to list the college–obtain the Federal School Code for the college you plan on attending and list it–along with any other schools to which you’ve applied.
- Forgetting to sign and date–if you’re filling out the paper FAFSA, be sure to sign it. If you’re filing electronically, be sure to obtain your PIN from www.pin.ed.gov. Your PIN is your electronic signature and will always be assigned to you only.
- Entering the wrong address–your permanent address is not your campus or summer address.
- Sending in a copy of your income tax returns–you will be contacted if your information needs verification; you don’t need to send a copy of your tax returns in with your application.
Much of the financial information you need to provide is on your tax forms. Completing your taxes early can make the application process easier because you’ll have the financial information you need in one place. You can estimate your financial information using previous tax years and correct the amounts on the form later by going to the corrections page on the FAFSA website. If you are not required to file taxes you still have to fill out a FAFSA to get financial aid.