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September 2016
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What to Do if You Didn�t Start Saving Early
Understanding your late-start options when saving money for education

Even if you didn�t start saving early, you can still take advantage of several options to put money away for higher education expenses.

Financial aid and federal loans - According to the Trends in Student Aid 2014 College Board report, �Each year, federal and state governments, colleges and other organizations award more than $184.5 billion in undergraduate financial aid.�

You can apply for financial aid through the FAFSA, or Free Application for Federal Student Aid, form. Parents and students will need to file a FAFSA form each year the child is enrolled in school.

�Almost all scholarships and loan programs run through the college�s financial aid office. So if there is a difference between the college�s annual costs � say $50,000 � and your expected family contribution � perhaps $30,000 � the school will try to forge a financial aid package worth $20,000,� reported Forbes contributor Steve Cohen in an October 2010 article.

Your child�s financial aid package will comprise three things � scholarships or grants, work study eligibility, and student federal aid, such as Stafford, Perkins, subsidized and unsubsidized loans.

Founder Robert Farrington of The College Investor suggested in an April 2015 article in Forbes that parents who haven�t saved enough can also take out loans to pay for school.

There are Federal PLUS loans, or Parent PLUS loans, issued by the Department of Education. These have different repayment options than other loan types but with limited student loan forgiveness and income-based repayment programs. There are also private parent student loans, which may have lower interest rates and payments than federal loans, but have limited repayment plan options.

Alternative options for funding college - In a May 2014 article in The New York Times, columnist Ron Lieber for the Times� �Your Money� section suggested several options for alternatively funding educational expenses. For one, make sure your child applies to at least a few schools where he or she would be considered an above-average student, as these universities may heavily discount tuition and provide scholarships to get your child to enroll.

Your child can also consider taking a gap year, either to work full time to help save money, or to join the military to be able to get financial benefits to attend school later on, stated Lieber. Not sure taking a year off is the best idea? Consider starting your child�s education at a local, lower-cost community college. You will save money on housing and your child can later transfer to a university or other four-year college.

�Just be strategic about it from day one and figure out what you need to do to transfer to a top four-year school with your credits intact,� advised Lieber.

Using your retirement funds - If you have over-saved for retirement, you could potentially put some of those savings toward college tuition and educational expenses.

�You can take money from your IRA before you reach age 59� and not have to pay the 10 percent additional tax if, for the year of the distribution, you pay qualified educational expenses for yourself; your spouse; your or your spouse�s child, foster child or adopted child; or a descendant of any of them,� reported John Wasik, author of �The Debt-Free Degree� and �Keynes�s Way to Wealth,� in an April 2016 article in Forbes.

�For purposes of the 10 percent additional tax, these expenses are tuition, fees, books, supplies and equipment required for enrollment or attendance at an eligible educational institution. They also include expenses for special needs services incurred by or for special needs students in connection with their enrollment or attendance,� according to the IRS, Wasik noted.

Just make sure you�re not digging yourself into debt later on when it comes time to retire.

If you need any more advice on planning your child�s educational savings, contact us and we�ll be happy to help.


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