Is It Too Late To Save Money For College?

    According to Money Magazine, 87 percent of American parents plan to help put their children through college.  Unfortunately, nearly half of those parents have not saved any money for that purpose.  If that includes you, just remember that it is never too late.  Although it is much better to start saving when your children are very young, you can still save some money in a year or so, and you have time to check out other ways to help.

     Money Magazine recommends following several basic principles:

    • Set family goals.  Figure out how much you need to carve out of today’s spending for tomorrow’s college costs.  If you have only a year or so left and cannot save the whole amount needed, even $50 to $100 a month will help.  Determine a budget with your child to determine how much you can provide and how much will have to come from other sources.

    • Invest carefully.  If your children are teens, most investment experts recommend short and intermediate term bond mutual funds or bank sponsored CDs.  You could also consider U.S. savings bonds.

    • Borrow if you must. Stafford Loans, PLUS Loans, and home-equity loans are considered among the best deals.  Students can now deduct interest on education loans from their taxes even if they don't itemize.  It is also possible to borrow from your 401(K) or similar retirement plan.  Just use caution.  You will have to pay back what you borrow with interest and you need to continue contributing money to your retirement fund not only to be prepared for retirement but also to be able to take advantage of matching funds from your employer.

    • Don’t let your child get too rich.  If you invest too much money in your children’s names in order to get a tax break, it could substantially decrease the amount they can receive in aid.  That is because colleges and the government expect students to use 35 percent of their assets toward education whereas they expect parents to use only 5.6 percent of theirs.  For example, keeping $20,000 in your account rather than your child’s account could help him or her qualify for an extra $5,000 in aid.  That amount would completely offset the tax savings.

    • Check out scholarships or other college benefit programs.  Help your child investigate the availability of financial aid from federal, state, local, and private sources.  Although requirements for receiving scholarships from public sources have grown tighter, there are still private sector scholarships.  Take a look at what corporations, labor unions, professional associations, religious organizations and credit unions have to offer.  Private scholarships are sometimes based on criteria such as ethnic background, extracurricular activities, work experience, and community involvement.

    We also recommend that you check out the excellent college payment plans available through the military, such as the ones offered by the Army National Guard.  The Army National Guard programs are described in detail later in this book.