How Will Your Kids Pay for College?

One of the issues that is getting some play in the personal finance world right now is the fact that changes are coming to subsidies for student loans. Indeed, the new Obama budget offers more for grants, but gets rid of subsidies paid to lenders to offer low cost student loans. So this begs the question: How will your kids pay for college?

Well, the answer probably isn’t that simple. Chances are that your kids will get their college funds from a variety of places. Here are some options for your kids’ college:

• You can help. You can start now, setting aside money for your kids’ college education. In fact, many folks start setting aside money before they even have children. With vehicles like 529 plans and the Coverdell, it is possible to further increase what you’re setting aside.
• Encourage your kids to save. There is a lot to be said for encouraging your children to contribute money toward their own educations. They, too, can contribute to savings plans. After all, they can borrow for school, but you’ll find it difficult to borrow for retirement.
• Scholarships. Ah, the tried and true fall back. There are fewer scholarships available these days, but they can be found. And if your child works hard, it is possible to have a good portion (or even all) of his or her college paid for with a scholarship.
• Part-time jobs. I had a part-time job to supplement my scholarship. It worked out pretty well — even though I did the stupid thing and took out some modest (yet unnecessary) student loans.
• Grants. If you qualify, there should be more of these available. Of course, you have to meet the income requirements. Many in the middle class will have a hard time getting grants.
• Private student loans. These are increasingly becoming more popular ways to get the college financing needed. I used private student loans to help fund my graduate degree. And, with federally subsidized student loans in decline, private loans may pick up. Web sites like Tuition U (which just bought Green Note, a college microfinance site) and Teri.org provide places that you can find private student loans. Unfortunately, you also have to pass a credit check in some cases.

Additionally, programs like Upromise can help you get a few extra dollars for college. (Although I suspect the Upromise earnings for my son will be just enough to cover one semester of housing.) There are still plenty of options to help pay for college, and chances are that your kids will have to combine two or three methods in order to cover the costs.

image source: donlelel via Wikimedia Commons