FINANCING A COLLEGE EDUCATION
Key Scripture: Apply your heart to instruction and your ears to words of knowledge. -- Proverbs 23:12
Second only to your home mortgage, paying for your children’s college education is your most expensive endeavor. Such a large investment of time and money requires you to do several things. First, you should pray for guidance. Second, your child’s preferences and abilities as well as the finances available should guide the selection process. Third, once you have decided on the college, talk to the school’s financial aid counselors, who can provide information concerning scholarships and financial aid. Wherever your child applies, he or she should also apply for financial aid, even if you feel you may not be eligible.
There are two types of scholarships—those based on merit and those based on need (grants). An academically gifted student is eligible for numerous merit scholarships, the most well-known being the National Merit Scholarships. For those gifted in sports, there are also many athletic scholarships available. In addition, check on scholarships given by major corporations, religious and civic groups, as well as other special interest groups. Your local library or high school guidance counselor should have a directory listing such scholarships.
Grants and Work Study
If your income falls below certain guidelines, or you have more than one child in college or are a single parent, you are probably eligible for a need-based grant. Pell Grants, which do not have to be repaid, are funded by the federal government to provide basic financial aid for eligible undergraduate students. To receive the full award, the student must be enrolled on a full-time basis. The Supplemental Educational Opportunity Grant (SEOG) is also funded by the federal government to assist eligible students. Many states also provide grants to students in public and private colleges. College Work-Study (CWS) is a federal employment program for undergraduate and graduate students with demonstrated financial need. If your child attends college in a community with limited employment opportunities, the work study program may provide the only available job.
Unlike scholarships or grants, loans have to be paid back. But the pay-back varies in interest rate and schedule. The Perkins National Direct Student Loan (NDSL) is a long-term low interest loan made to undergraduate and graduate students. These loans are interest free until six months after graduation or withdrawal from school. The minimum repayment rate is $30 a month with 5 percent interest. The Stafford Student Loan (Guaranteed Student Loan) is available for those who do not qualify for NDSL loans. They carry a higher interest rate and the borrowing limits are greater. Parent Loans to Undergraduate Students (PLUS) is another available loan program. But it has high interest rates with strict guidelines for repayment. Consider loans only after exhausting other financial resources. Many students or parents are burdened with loan payments for years after graduation. If you must get a student loan, shop around for the best interest rate and repayment schedule.
See Table D, "Types of Educational Institutions," for a comparison of advantages and disadvantages of each one.
Series EE Savings Bonds
If you are just beginning to save for your child’s college education, many financial planners suggest the Series EE Savings Bonds, a safe government security. For bonds purchased after December 31, 1989 in the name of one or both parents, Series EE bonds’ accumulated interest is exempt from federal income tax provided the proceeds are used to pay for college tuition. However, they must be used in the same year that the bonds are redeemed. The Charitable Remainder Unitrust is another good vehicle for underwriting your child’s education and is explained more fully in Chapter 7.
You should check the record of your Social Security earnings every three years. You can get a copy of your Personal Earnings and Benefit Estimate Statements (PEBES) by obtaining From SSA-7004 for your local Social Security office or by calling 1-800-234-5772. Check the record against your W-2 Forms for past years to insure its accuracy.