College Savings Not Enough?

By Staff

Children grow up quickly. It seems like one day you’re driving a baby home from the hospital and the next, you’re dropping her off at her college dorm. Fleeting time and inflation can easily conspire against us, as well, like when we realize that the amount we’ve saved for our kids’ education may not be enough to cover the expenses.

If your child decides on college or higher education you will be faced with the decisions about how to pay for that education. If you planned ahead you might have saved enough money to pay for college completely. Or you might have a wealthy relative willing to give your child all the money for college. If you are like most people, neither of these apply to you.

So what are your options for paying for college? Most students will receive some form of financial aid. The amount and type of financial aid offered is based on two factors: the student’s merit (scholastic, athletic, musical, etc.) and the student’s financial need. To find out about student aid, you can go directly to and they have an online calculator to help you answer financial questions. The financial aid a college gives a student can be in the form of scholarships or grants. Scholarships or grants do not have to be repaid unless stipulated in the award. Students who leave a service academy early may owe the government the cost of tuition and room and board.

To find out about financial aid you can go on website and try their college cost calculator. It is close to what the government calculates. When your student is a senior, you will be required to fill out a Free Application for Federal Student Aid at To fill out this form, you will need current tax information, how much is in your savings accounts (excluding retirement accounts and any Coverdell Education Savings Account or 529 college savings plan plans), how much is in your child’s savings accounts excluding ESA or 529 accounts, and the number of people in your family and your age or your spouse’s age if they are older.

Once you fill out the forms you will receive an estimated Expected Family Contribution or EFC amount. The FAFSA can then be sent to one or multiple colleges. You must fill out a FAFSA the year before your student enters college between Jan. 1 and June 30 of each college year.

Most colleges encourage student to take out loans. There are two types of loans — federal student loans and private student loans. Federal student loans are backed by the federal government and have fixed interest rates. While federal student loans have strict eligibility requirements and borrowing limits, they traditionally offer several advantages over private loans. They can be subsidized, in which the government pays the interest accruing while in college, or unsubsidized, in which where the interest accrues while in college and so the amount owed is higher when leaving college. Private student loans usually have higher fees and variable interest rates.

If you are currently in the military or a retiree, you may be eligible for the post 9/11 GI bill. The Post-9/11 GI Bill pays for education and housing costs for military service members and veterans who served at least 90 days of aggregate service on or after Sept. 11, 2001, or who were discharged with a service-connected disability after 30 days. Eligible veterans can claim benefits for up to 15 years after leaving the military. This can be transferred to spouse or children. This benefit can be split between students. The student’s tuition and fees up to $17,500 will be paid directly to the school. A stipend for books/supplies of $1,000 will be paid yearly based on enrollment.

The student will also be paid the Basic Allowance for Housing rate for an E-5 with dependents living in the school’s location. This program does have lag time with payments that can affect taxes. Your student will receive the book stipend and housing allowance directly with the school receiving tuition payment. Be aware that this is a benefit and there is no guarantee it will continue.

Your student may qualify for work-study at college. This is a program where the college student works and gets paid minimum pay. They have priority for job placement on campus. However this money is paid directly to the student and they can use it to pay for college or for pizza. Many schools include this in the financial aid packet but in reality it goes directly to the student and is not used to pay for college tuition.

As your student prepares for life after high school there are many things to consider. Taking out loans for college means that your student will have debt added to cost of living. Be careful using student loans since they can add up to be more than what your student will make for a living. The goal to strive for is that in three to five years after college all loans are repaid. So that means if your student is going to become a teacher and make $25,000 a year they should not come out of college with $100,000 in student loans. Usually a person who is making $30,000 to $40,000 a year should have no more than $25,000 in student loans to repay (or about $6,250 per year of college). Taking out large loans is mortgaging your future earnings with no guarantees of a job in this recovering economy.