When your teenager starts the college application process, it’s a proud moment for most parents. College is an exciting time for teens and, in many ways, it paves the way for adulthood. Between applications and campus visits, you’re probably also wondering how to cover the cost of higher education. It never hurts to get a head start on planning and saving. If you’re looking into ways to finance your child’s college tuition, consider these options:
One way to pay for all or part of college is with scholarships. Scholarships are merit-based financial aid that does not have to be repaid. There are many different types of scholarships available, from those based on academic achievement to those based on extracurricular activities or community service. Many schools award scholarships to high-performing students upon admission. This can significantly reduce the cost of tuition. Students can ask their guidance counselor or conduct some online research to find out what scholarships they may be eligible for.
Grants are a type of financial aid that typically does not have to be repaid. There are federal, state, school, and private grants available to students. One way to find out what grants you may be eligible for is to fill out the Free Application for Federal Student Aid (FAFSA). For state, school, and private grants, there may be additional forms. It can help to do some research and to figure out what grants your child is eligible for.
3. Student Loans
Another option is to take out student loans. There are federal student loans and private student loans available to most students. Federal student loans usually have lower interest rates and more flexible repayment options than private student loans. Private loans may also require a parent or other adult to act as a co-signer. It’s a good idea to compare rates and loan terms as much as possible before making a decision.
Another option is to use personal savings. Some parents start setting aside money for college when their kids are very young. There are even tax-advantaged savings accounts designed to be used for the beneficiary’s qualified education expenses, such as a 529 college savings plan or a Coverdell education savings account. Personal savings are a great way to pay for college, but this method requires both advanced planning and money to set aside, which isn’t possible for everyone.
6. Permanent life insurance
The cash value of a permanent life insurance policy can be an option for paying for college. If you have a permanent life insurance policy like whole life insurance or a universal life insurance , you know that the cash value grows over time as you continue to pay the required premiums. Using the policy’s cash value can allow you to cover all or part of college expenses.
The primary purpose of permanent life insurance is to provide a death benefit. Using permanent life insurance accumulated value to supplement retirement income will reduce the death benefit and may affect other aspects of the policy.