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Figuring out how to pay for college


With the average cost of just one year at a private university costing $35,000, families are being forced to come up with a lot of cash, in the worst recession of our lifetimes. Many are looking at the money they’ve put away in their child’s 520 College Savings Plan, and are seeing no growth because the account is tied to the stock market.

For an alternative that isn’t as volatile, some say look at 529 plans outside of Massachusetts.

“It just so happens that Arizona, Montana, and now Indiana, they offer these College Sure CD based 529 plans that are more conservative, and they are based on CD’s that grow with the rate of college tuition,” says Deb Neiman, a financial planner.

The benefit of this type of plan, experts say allows you to know that you’ll have a certain amount of money by the time the first tuition bill is due.

Since Massachusetts doesn’t give you any tax benefits for using the state’s 529 plan, it makes sense to put your money in a plan that will guarantee your cash.

Another less risky way to grow your money is through municipal bonds, “the benefits of that when you buy a bond you know what the yield to maturity is at purchase, and as long as you hold the bond until it matures, that’s the return you’ll get,” says David Smith of Rockland Trust.

But when it comes to financial aid, Lynne Myers of the financial aid office at the College of the Holy Cross says there are several factors that go into coming up with your package.

“It’s not just savings. We look at it as a significant purchase, we use the resources of income, we use our past income in the form of savings, we use our current income, what comes right out of our budget, what have I not committed already to another purchase. In my future income, how much am I able to finance? You have to consider all three of those sources,” Myers says.

When it comes to college loans, there are do’s and don’ts here as well.

Experts say the Federal Student Loan Program is the safest way to go. The rates are set by the government and can be consolidated.

Think twice when it comes to private loans, these tend to have higher interest rates and can mean a hefty monthly payment for your child soon after graduation. Do some digging for grants you may qualify for since you don’t have to pay that money back.

The bottom line, when it comes to figuring out how you’re going to pay, Ann McDermott of Holy Cross admissions says getting the financial forms into the college at same time as the application gives more of a chance of getting the best package possible.

“They shouldn’t be waiting until they are accepted no matter how much good work the financial aid office is doing. It’s shocking and amazing how many families think that’s the time the conversation starts is once they get the acceptance letters, and if that’s the one point we can get to your parents, is it’s not then, it’s now,” McDermott says.

If a college’s price tag is just too much, you may want to think creatively rather than getting into debt to get that degree you’re after.

“Very often community colleges have programs with local universities where you start off at your community college, you accrue a certain amount of credits, and it will transfer into a university so you end up getting a university diploma for a lot less, cost-wise, had you gone there all four years,” Deb Neiman says.

Because in the end, experts say, the decision is a huge financial purchase, and college is one investment, you don’t want to regret.

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