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Helping Fund Your Children’s Education

finances_college_collegefundingChildren are expensive and nowhere is this truth more evident than in the saving and paying for a college education (or two or three, depending on how many children you have). The sad fact is that there are still some families that have to choose which child to send to college, while leaving the other children to figure it out on their own. College is expensive and the current job market I as such that a four year degree isn’t always enough, meaning children need to extend their educations to the graduate level which can add anywhere from two to six additional years to their scholarly pursuits, such as a Denver MBA or a Ph.D. When this stark reality is considered it can cause an immense anxiety in well-meaning parents. But there are some steps that can be taken to ease the burden.

There are certain savings accounts and programs that can be set up specifically to set aside money for a child’s education. These accounts may have special incentive interest rates or require minimum monthly deposits. The government has made allowances for certain tax-free savings programs for college funds, such at the 529 college savings plan but with this plan you will most often have to name the recipient of the funds ahead of time and this plan does require proof that all funds spent are applied toward a college education and related college expenses. Retroactive taxes can be applied to funds that are found to have been used for non-college related purchases.

Another way to supplement the expense of college is to fill out a Free Application for Federal Student Aid, also referred to as a FAFSA, form. This is the means by which financial aid for college can be awarded to a child. A lot of parents will avoid this step because they mistakenly believe that their salaries are too high for their child to qualify. It is important to remember that there are varied facets to the qualification process as well as variations on the amount of aid a child can be approved for. This means that, while your income may exclude your child from qualifying for a full financial aid allowance, your income may be in the right range for your child to receive partial financial aid. Even if your child is completely denied all financial aid grants they will still be eligible for Stafford Loans. A Stafford loan is not a grant and therefore must be repaid but it generally offers lower interest rates and deferred payment plans, meaning your child will not be obligated to start paying back the loan until after they have finished with school and joined the workforce.

It is also recommended that parents engage their children from an early age about the cost and necessity of attending college. You should encourage your children to contribute to their college savings accounts and explain to them the ways in which they might be able to achieve a scholarship to a university. This is not to say that it is advisable to put undue pressure on children to accomplish such feats. Too much pressure can backfire and cause your children to resent the responsibility of a college education before that education can even begin. Just keep an open dialogue flowing and explain that life is what you put into it. Most kids respond well to encouragement and chances are they will do their best to make you proud.

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