4 Ways Parents Can Help their Kids through College Financially

Sending your kids through college isn’t cheap. Over 44 million Americans currently hold nearly $1.5 trillion in student debt, which means that roughly one in four adults in the United States are currently paying off student loans. That worked out at an average debt of $37,172 per student. Ouch.

As costs continue to rise, it is leading many parents to wonder how they can help their kids through college financially. There are several strategies for this depending on how involved you want to get, ranging from creating a college saving plan when they are still in diapers to using your own retirement funds to help ease the burden.

Here are four ways parents can help their kids through college financially.

Create a college saving plan

One of the easiest ways to help your kids pay for college is by setting up a saving plan early in their lives. You can do this through a 529 college saving plan, available in all 50 mainland states and the District of Columbia, or by simply putting away a certain amount of money per month into a separate account or trust fund. Even by putting as little away as $50 a month from when your kid turns two, you’ll have saved $9600 to help towards their college costs by the time they turn 18.

Apply for PLUS or private loans

Around 3.4 million Americans currently have Parent PLUS Loans which they use to help pay for college. These allow borrowers to loan an amount that is as high as the cost of tuition and are treated like basic federal loans, although they do have a higher interestrate of 7 percent. If you have a good credit rating, you can also apply for a private student loan from a private lender or bank which may have a lower interest rate.

Look at relevant grants and scholarships

Plenty of charities and foundations appreciate the financial burden of going to college and the way it can prove to be a barrier to those from less well-off families from entering further education. That’s why they offer bursaries and scholarships to ensure that gifted students from poorer backgrounds don’t miss out on college due to financial reasons. Look at the various scholarships and grants that could help your kids through college and encourage them to apply, such as the Shawn Carter Foundation which helps individuals facing socio-economic hardships further their education at post-secondary institutions.

Tap into your retirement plans

The average “gift” from a parent to their student when it comes to financing college studies is $10,147. A fair chunk of this comes from peoples tapping into their retirement plans in order to help their kids. For people under the age of 59, early withdrawal penalties don’t occur if you are using the money to help pay for college education although it is important to consider that you might then owe tax depending on whether it’s a traditional or Roth IRA and how much money you withdraw.