Answering Your Education and College Savings Questions

How to Save on College Student Expenses on Campus and Earn More Money

The following is a guest post on Money Q&A by Andrew Rombach, who manages the scholarship website, scholarshipfly.com. Would you like to write the next one? If you would like to write an article for Money Q&A, please visit our Guest Posting Guidelines page. You are spending too much money on your college education. Unless you’re the world’s thriftiest student already – and chances are you’re not – it’s a fact that you’re not saving as much money as you could be. You’re spending too much money on college student expenses. Save on College Student Expenses on Campus Below are a few of the biggest categories where students fail entirely in picking cost-effective options, aside from opting for in-state tuition. These failures keep students … Read more

4 Tax Deductions and Credits for College Students and Parents

by Hank Coleman

College Tax Deductions and Credits for Students

Most colleges are back in session, which means millions of students across the U.S. are in the midst of taking out student loans and paying for tuition, fees, textbooks, laptops, printers, and other school-related expenses. Those costs really start to add up. And, although grants, loans, and other forms of aid can help you maintain financial stability while you’re in school, college students and their parents shouldn’t miss out on potential savings through college tax deductions and tax credits. Publication 970 from the IRS lists all the ways independent students and parents with college-aged dependents can save money on their tax bills with education-related expenses. According to CollegeBoard.org, students and their parents saved about $17.9 billion on their federal income … Read more

College Costs: How to Encourage Your Kids to Go In-State (Saving You Thousands)

by Hank Coleman

The following is a guest post by Brian Kuhn CFP®, the author of, “The Personal Finance Handbook“. If you’d like to submit a guest post on Money Q&A, please check out the site’s guest posting guidelines.

College costs are a problem. It is a trillion dollar problem delaying the retirement of the parents and stunting the career growth of the students. Everybody knows it and it’s not going away anytime soon. Total student loan debt is now over $1.3 Trillion as of June 2016.

Planning for your children’s college journey is a personal finance issue. It is often asked, what strategies there are or how much to save? With what type of vehicle to save in? Are there any tricks to the FAFSA process? (In almost all cases there aren’t.)

You can save into 529 plans. You can shelter income through deferral to a 401k. Or, you can remove assets from the child’s name. But, these strategies are really limited in their effect.

What About Instate Tuition?

What does make a big difference though is whether the child goes to college in-state or out. That is a communication issue, not a personal finance issue.

Kids go out of state for all sorts of reasons, not all of them logically thought through. Ever hear a 17 year-old say they want to attend that public university half way across the country for $50,000 a year because the campus layout really fit them?

But, hey, this is your kid we are talking about, you want the best for them. If the communication is good though they might go in-state and love it, saving you in some cases tens of thousands of dollar in the process.

Total student loan debt is now over $1.3 Trillion as of June 2016.Click To Tweet

Three Crucial Money Conversations Parents Need To Have Before College

by Hank Coleman

Money Conversation - Three Crucial Discussions Parents Need To Have

Parents need to have a money conversation before they send their college freshmen off to school. Most new college freshmen have never taken a course in money management or personal finance. Personal finance isn’t taught in America’s high schools. And, it’s up to parents to have a money conversation and discussion about being financially smart before their children learn hard lessons on their own.

A recent survey by USAA.com found that 82% of parents are discussing budgeting with their soon to be college student. Parents must have a tough money discussion with their children just like they would discussing their expectations and priorities for their children’s academic studies.

A recent @USAA survey found that 82% of parents are discussing budgeting with their college freshmanClick To Tweet

Here are three key topics that parents should discuss with their college bound children during their first year on campus.

Money Discussions Parents Need To Have With Their Children

Building Credit Responsibly

When I left for college, my mother gave me a credit card to use for emergencies. She had me listed as an authorized user of one of her credit cards, and I got one associated with her account with my own name on the card.

The real issue came from us not having a very good and clear discussion before I left about money and what constituted an emergency. Her idea of an emergency and mine turned out to be vastly different when I started charging lunches with friends, clothes, and a host of other things on the credit card.

“Responsibly managing credit is a key part of the financial education that should be happening at this time of our kids’ lives,” says JJ Montanaro, a Certified Financial Planner at USAA. “To that end, I like the idea of helping our kids obtain a low limit credit card or a secured card.”

Other financial experts don’t recommend parents giving their children a credit card as an authorized user on their card. Others simply think that young adults need their own credit cards in order to help them start to build their own credit history.

Another option is for parents to help their college-bound children apply for a secured credit card to start. Many secured cards require a deposit that acts as the card’s credit limit. Many secured credit cards also report activity to the three credit bureaus, which helps young adults build a credit history for other non-secured purchases later in life.

Be sure to check out a USAA Secured Credit Card that can help you build or improve your credit score. The card from USAA is secured by an interest-earning CD, which you set up when you open the account.

“While you can add them as an authorized user, that approach could increase the potential damage of a misstep,” says Montanaro. “Adding [a child] to my $20,000 limit card vs. cosigning a $1,000 card is potentially less dangerous. The beauty of this sort of arrangement is that you can closely monitor what’s happening while they learn the ropes of responsibly managing credit.”

Or, you can send your college freshman to school with a prepaid debit card. Prepaid debit cards have many advantages to them that could benefit your student.

College is a place to learn both academically and life lessons. One-third of parents surveyed by USAA.com say their children will not have a credit card as they head to college.

Should I Open a 529 College Savings Account?

by Hank Coleman

This guest post is by Kimberly Palmer, author of the new book, “Smart Mom, Rich Mom: How to Build Wealth While Raising a Family”.

For a long time, I resisted opening 529 college savings accounts for my two children. It seemed like a giant hassle, adding even more paperwork to an already complicated situation that included various retirement accounts and a mortgage. I could barely keep up with our current stack of accounts; how could I possibly manage more?

But after delaying the decision for a couple years, I finally decided that I couldn’t pass up the tax savings any longer. After all, if you open a 529 account, the earnings are not taxed, as long as you use the money for its intended purpose of education.

After conducting some basic research about our available state plans, I went ahead and opened the accounts. Here are three reasons why you should also consider opening up a 529 college savings account today:

The tax savings: The most obvious reason is also the most important: An analysis done by Vanguard for the New York Times showed that if you put $5,000 a year into a 529 savings account that grows 6 percent a year, then after eighteen years you’ll have $179,140 in the account for education expenses. (You can also play around with your own numbers using college savings calculators at FINRA.org, Bankrate.com, Fidelity.com, or your own financial institution.)

It forces you to save the future. It’s so easy to let daily and monthly expenses eat up your entire budget. But if you set up a college savings account and commit to making regular deposits into it, you’re setting money aside for the future and guaranteeing it won’t be spent on restaurant meals or new outfits instead.

It gives you a chance to talk to your kids about your educational values. Ever since we started actively saving for college, the topic has come up more in dinnertime conversations. Our kids are interested to hear that we want them to go to college one day, and even though they are still just learning to read, I think it gives them a good goal to plan for. They also are starting to grasp that college is expensive and that finding a way to pay for it one of our priorities, so we might make some other sacrifices in the short-term to get there.

Is Going to College Worth It Anymore?

by Hank Coleman

According to a 2014 study on the value of college from the Pew Research Center, college graduates are outpacing their peers in “virtually every measure of economic well-being and career attainment.” This includes average annual income for full-time employment, poverty and unemployment rates, and job satisfaction. For example, when study participants were asked if they were “very satisfied with their current job,” 53% of college graduates with bachelor’s degrees answered favorably, compared to 36-37% of high school graduates and people who have some college experience or an associate’s degree. Have you considered going back to college for a bachelor’s or advanced degree? Or are you debating whether college is worth it for your kids compared to jumping into the workforce … Read more