Paying for College - 6 Last Minute Funding Options

Congratulations! Your child just got accepted to the college of their choice.  After a few minutes of excess jubilation, you scratch your head wondering how you will pay for this wonderful opportunity. Usually the beginning of every school year starts “This is the year I will start saving for little Bobby’s college education.” Then you wake up one morning in the summer before their senior year at high school and realize you have $250 in Jr’s account. Before your hair starts coming out in clumps, take note of these last minute tips:

1. Florida’s Bright Futures. When you woke up that summer morning and realized that you only had $250 in Bobby’s account, the $10 in lottery tickets you bought in a panic went toward funding this program. Take advantage of it if you can. There are three different award types and three different requirements for eligibility including community service hours (your student, not you). You can find more information by going to www.floridastudentfinancialaid.org. Applications are accepted beginning December 1 for the 2012 school year. This year it is required to fill out the Free Application for Federal Student Aid to qualify.
2. Merit Scholarships. Maybe little Bobby has a proclivity towards academics and hence his acceptance into the elite school. If academics are not Bobby’s thing, a merit scholarship on his ability to run track or play golf is another option. www.finaide.org is one of many great resources to find information.
3. Need Based Scholarships. Ok your $250 will not cover the tuition for Duke, but do you truly have a financial need? To determine need, fill out the Free Application for Federal Student Aid (FAFSA). The financial need is determined by subtracting the “Expected Family Contribution” from the cost of attendance. The financial need is further adjusted by the resources of the student.  The form needs to be filled out in January of the student’s senior year. It can be found at www.fafsa.ed.gov.
4. Student Loans. These could be federal or private. Federal loans can be subsidized or unsubsidized. The qualification for subsidized is determined by your FAFSA.  More information can be found here: www.direct.ed.gov. On the private side, the loan is issued from a bank. Both ways offer low cost ways to finance a college education.
5. Retirement accounts. Maybe your hope is that little Bobby will support you after he finishes college (you may have a better chance for a winning number on your lottery ticket). Parents can use IRA money to pay for college. You will have to pay ordinary income taxes on the amounts withdrawn, but you may be able to waive the 10% early withdrawal penalty if the funds are used for approved tuition expenses. Check with your accountant. Additionally parents may be able to take a loan against your 401k. You have to pay yourself back with interest, but it’s better than having to pay the bank.
6. Life Insurance. No, you don’t have to die first. As with your 401k, you may be able to take a loan against the cash value of your policy. This could have adverse affects on your insurance and estate planning. Check with your insurance agent or your financial planner.

Individually these may not cover the entire bill, but combining strategies may help get you to through. Even with these last minute options, it is still much easier to plan for this expense in advance. A financial planner can help to prevent the procrastination. It is easy to find a planner through the Financial Planning Association. Go to www.FPAnet.org and click on find a planner.