A Letter to the Parent Sending a Child to College
The time has come and your first child is heading off to college.
It's not too late to review the potential financial impact of this journey and make some modifications to your plan in order to improve the results. Here are a few suggestions based on my experience with four children who have made the journey.
- My first bit of advice here was also part of many of my past columns: start as early as possible to prepare and save for college expenses. If you have more than one child who will be attending college, don't let up on the savings just because the first child has started school.
- It's not too late to be realistic about the type of college or university you seek for your child. Private schools are for the most part very good institutions offering excellent opportunities. However, private colleges often carry a significantly higher price tag than state schools. Keep in mind that some state schools rank at the top for specific areas of study, with costs sometimes less than half of private schools.
- You have secured the necessary loans and the major costs of tuition and room and board are covered; now encourage your student to develop a budget for the ongoing day-to-day costs to steer clear of unpleasant surprises.
- Encourage your child to seek part-time employment. Even if he or she didn't qualify for Work-Study assistance from the financial aid office, remember that every college has a significant number of part-time jobs open to any student.
- Don't give up the ongoing pursuit of additional grants, awards, and scholarships to help defray costs. Many local businesses, clubs, financial institutions and church groups offer one-time awards of $1,000-2,500. These can go a long way toward reducing the financial impact of books and incidentals.
- If you were fortunate enough to set up a 529 plan to help save for your child's college costs, continue to fund this account as all earnings continue to accumulate tax-free.
- Be sure to look into the American Opportunity Credit. Based on income level, this credit provides up to a $2,500 benefit for each student. A tax credit reduces the amount of income tax you may have to pay. Unlike a deduction, which reduces the amount of income subject to tax, a credit directly reduces the tax itself.
- Maintain an ongoing dialogue with your child, not only on classes and grades, but also on week-to-week finances and any upcoming needs such as lab fees, field trip expenses, etc. You may be surprised by how much anticipating these needs and addressing them takes a great burden off the student and allows for more focus on studies.
Article was written by Patrick Catania