Your Finance: College tuition strategies
This is the time of year when high school seniors calm down and their parents get anxious. The students have received those coveted college acceptance letters, but how will Mom and Dad scrape up the money to pay for it?
Some schools have breached the $60,000 mark for one year of tuition and fees. The interest rates on federal student loans are slated to double from 3.4 percent to 6.8 percent come July 1, unless Congress acts before then.
But families have more tools and power at their disposal than they think. Here are some tips for parents:
First, calm yourself. There is no one school that will make or break your child's life. Your child can take time off before going to school, start at a cheap community college and transfer to State U. She can stretch four years into five and work in between, or give up her summers to school and shave a semester or two off their program. He can -- steel yourself -- live at home and commute to school. All of these strategies will save money.
Look for special circumstances. Need-based financial aid is typically formula-based. Some colleges will negotiate if you show them a better package from a competitive school. But most will not. If you have special circumstances, such as unemployment or unusual health care costs, write a brief, numbers-driven letter to the financial aid office at the colleges your child is considering.
Do a cash-flow analysis. Figure out what it will cost for all of your children to get their degrees, and then make a plan for where you will get that money. In the years when you have more than one child in college at once, you'll get more aid. If you have enough cash to pay for the early years but not the late ones, be strategic. One way to do that is to use up all 529-plan savings and other college-aimed savings early, deferring loans until they are absolutely necessary.
Pick and choose. Just because a school gives you a comprehensive financial aid package that includes grants, loans and an on-campus job doesn't mean you have to take all of it. You can take the grants and the job and leave the loans, pulling money from other sources, including family savings, home equity and Grandma. Or you can take some of the loans and the grants and have the student look for higher-paying work off campus. If your student has her heart set on one particular school, you could even ask her to skip the costly spring-break trip and earn extra money during academic vacations. After all, drastic times call for drastic measures.