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8 Ways to Save When Starting College

8 Ways to Save When Starting College

Save by Maximizing Aid Eligibility.

Financial aid awards can make a difference of thousands of dollars. Grants and scholarships don’t leave the student with a heavy burden after graduation. Knowing how financial need is calculated in the Free Application for Federal Student Aid (FAFSA), you can take steps to prepare and maximize your eligibility for financial help. In short, anything you can do to reduce liquid assets before filing the FAFSA without losing value benefits both parent and student. Some tips:

Save money in a parent’s name, not the child’s: A college’s formula for calculating financial need considers about five percent of parental assets and twenty percent of the child’s assets. The lower tax bracket is incentive to save in the child’s name early in life, but once the child nears college age those funds work against them in terms of financial aid. Now is also the time to pay necessary expenses for the future: you’ll probably spend on a laptop for college, car repairs and dorm furniture anyway, so paying for it now reduces the student’s available resources from the financial aid viewpoint.

Maximize retirement fund contributions: Retirement funds are excluded from parental asset calculation, so saving for your future helps your student save for theirs. Many parents think that paying for their child’s education is their responsibility. However, students get financial aid to pay for college, and they have a career ahead of them to pay off debts. Parents don’t get help paying for their retirement, and they don’t have years ahead of them to rebuild savings once they’ve drained their accounts into tuition payments. Borrowing from a 401(k) is one of the worst mistakes parents can make because it incurs early withdrawal penalties and erases years of savings.

8 ways to save on collegePay off consumer debt: The FAFSA does not consider parental consumer debt in the need-based financial aid calculations. For example, the child of a parent with a high income and credit card debt will receive less aid than the child of a parent with a lower income and no debt. Paying off debt reduces the assets measured by the FAFSA, and repaying the debt sooner benefits you by saving money in interest. You have to repay the debt at some point, and before filing the FAFSA is the time to do it.

Save by Taking a (Tax) Break.

The federal tax code encourages college attendance by giving tax credits for tuition costs. If your adjusted gross income is less than $80,000 if you are single or less than $160,000 filing jointly with your spouse, you qualify for two important federal tax credits, according to a free tax calculator. The American Opportunity Tax Credit lets you claim all of the first $2,000 plus one-fourth of the next $2,000 in tuition and required fees for enrollment. You can claim it during the first four years of an eligible degree-granting program. The Lifetime Learning Credit can be worth up to $2,000 per year, but there is no limit on the number of years it can be claimed. It also includes courses that are not part of a degree program, so workers who take occasional courses to improve job skills are also eligible. You may only claim one of the credits for one child in a given year. Find more information on IRS.gov, which publishes FAQs on a range of tax topics in language anyone can understand.

Know why you’re going to college.

This could be the most important step in saving money when starting college. If you know why you are at your chosen college in your chosen field, you are less likely to change majors or transfer, which can lengthen your time in college if credits don’t count for your new major or don’t transfer to your new school.

Choose your studies carefully. Career tests, personality assessments, job shadowing and volunteer work can help you learn your strengths, weaknesses and preference. If you research careers and know your personality and preference, you will likely pick a path that suits you and leads you to a rewarding future in the workplace.

Choose your school wisely. Research your top choices. Don’t just take the tour, participate in it. Talk to your tour guide to get behind the script and ask as many questions as you need. Talking with students or taking time to just explore the area can give you a feel for the campus and decide if it fits you.

Start somewhere else. If your dream school is so expensive you can only dream of affording it, consider taking prerequisites at a more affordable school. First, become familiar with school policies on transfer credits. You may be able to take college-level courses during your senior year of high school. Scoring well on Advanced Placement (AP) tests or the College Level Examination Program (CLEP) can count for college credit and allow students to skip introductory level courses in their first year of college. Most curriculums have a core of basic requirements that are similar across colleges. You could take the same courses at a local community college for much less money, perhaps even living at home and commuting for additional savings. Consider also location, since in-state tuition is usually half or less of out-of-state tuition. If you want to go out-of-state, move to that state and work for the minimum number of months required to be a legal resident before enrolling.

Know your learning style. Knowing how you learn before you get to college will help you make the most of your class’s right from the start. If you learn by doing, sign up for a learning lab or form a study group with friends. If you need time alone to absorb information, find a quiet, comfortable study spot where you can do just that. Your grades will be better, making you eligible for more scholarships in the future and helping you retain what you learn, which is really why you’re there in the first place.

{ 7 comments… add one }
  • FlanneryCam September 23, 2012, 2:01 pm

    I would have to really agree with Know Why You’re Going to College. As a instructor and PhD student myself, I often wonder why a lot of my students are even in school. They aren’t passionate about learning and they often sign up for classes just to get the financial aid and then they don’t bother to come to class. This means that they fail the credit, but yet they are getting themselves in debt…

    College and university is not for everyone. Don’t let your parents tell you it is. If you need some time off post high school to figure out what you want from life, take it! 🙂 Trust me when I say it will help you avoid unnecessary and really heavy debt in the future.

  • KennyK September 24, 2012, 7:06 am

    I like how you have split the suggestions into 3 sections. Very valuable information. I was aware of some of the ways to save money, but others are new to me.
    Personally I know some students in my own family who just started college without really knowing why they were studying and what they wanted to do in the future. They changed some majors and it took them a longer time to finish, which also impacted their finances. Good guidance by parents and school from early on can help students to make the right decisions.

  • Felicia Gopaul September 26, 2012, 12:19 pm

    Parent’s guidance and helping their children assess what course they would take up in college is the best start on how to save money for college. Having the realization at an early age would definitely spare them from hopping from one course to another which is a waste of time and money.

  • BloggerMB September 26, 2012, 9:07 pm

    As a final year student at university I can’t help but echo the importance of knowing why you are attending. There are many students who just turn up “for the experience” and half heartedly take their classes. They normally spend an extortionate amount on alcohol and partying, and don’t think about thier long term financial situation.

    Firstly, if you are interested in your degree then you will hopefully gain scholarships and various other financial aids. Secondly, at the end of your degree you will hopefully have made enough contacts to go into an area with a decent pay (or at least in an area you enjoy).

    Thanks for the links to the other articles by the way, as a student it is always useful to pick up a few extra tips to save some cash.

  • LoveSanta November 5, 2012, 6:29 pm

    Most of those tips don’t apply directly to Australia but I agree with knowing what you want to do will make uni much easier to deal with – both in staying motivated to get the most out of it and also for minimising how long you are actually there.

    The other tip is to get second hand books where possible and use the library and internet for study rather than buying lots of resources.

  • GSBryce November 28, 2012, 1:48 pm

    FAFSA is a great place to start in the Financial Aid process, however I have heard of kids actually getting too much money and they end up spending the excess funds on random things like parties, clothes, etc. It’s a shock to them when the time comes around and they have to pay all of that back because they weren’t thinking clearly. We really need to educate our kids that this money is for education, not to be used for daily spending cash.

  • cellphonehippie July 9, 2013, 3:31 pm

    I took AP classes and other classes for college credit in high school and they were LIFESAVERS!!!! I was able to graduate in 3 years and save my parents a full year of tuition and room and board.


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