Who should read this chapter? All parents who plan on sending their children to college and anticipate difficulty paying for it.
Summary: Merit scholarships and financial need scholarships are difficult to get. There is a great deal of competition for these. Athletic scholarships may be easier to obtain than you think. Some other sources of college tuition assistance are discussed. Investing the savings for college (conservatively or aggressively) can be a difficult decision. Consider the tax consequences of the method used to save for college. There may be tax advantages to saving or investing in a tax-beneficial way.
There are some creative ways of paying for a college education. There are savings accounts, savings bonds, equity accounts, etc. Scholarships are often awarded for outstanding academic achievement or financial need. While we would all like to think of our children as outstanding, the reality is that these academic achievement scholarships are only available to a few students in each school. A student must be truly outstanding to get one of these. If your child receives such a scholarship, they should be congratulated as being very special. Scholarships based on financial need are also difficult to get since most middle class families often will not qualify.
Athletic scholarships may be easier to obtain than you think. This requires planning from a young age since it requires considerable work and concentration in a single sport. If your child is highly skilled in a sport, he/she may be recruited by big schools. If not, you may have to settle for a scholarship at a small college competing in less competitive conferences. Realize that scholarships are awarded in sports such as swimming, track, golf, volleyball, softball, gymnastics, soccer, tennis, hockey, wrestling, etc., in addition to the most popular sports of football, basketball and baseball. It is possible that your child could earn a scholarship in one of these sports. Athletic scholarships are not ideal though. I don't like the idea of a college student spending a lot of time in practices and traveling for several days at a time for competition, when they should be studying. College studies are difficult enough. Missing classes and scheduling special exams due to time conflicts with practices and out of town competitions can result in major academic stress for the student athlete. Because of this, I don't think that this is an ideal way to go to college. If you can afford to pay for their college tuition, then this would permit more focused study while attending college. However, if an athletic scholarship is your only means of going to college, then do it.
The military offers its personnel the opportunity to go to college under certain conditions. This requires a military service commitment to qualify. Military experience can be a valuable asset in seeking a job. It is a learning opportunity offering avenues for special growth and maturity development that only the military can provide. Veterans are proud of their military service and it is always a memorable period in one's life. However, for obvious reasons, this is not for everybody. The commitment to military service is a serious one that should not be taken lightly.
One method that is not very popular is to ask a rich person to help send your son or daughter to college. I'm kidding right? Think about this. What if you were really wealthy and had $50 million? Most wealthy people use their wealth to build more wealth and to acquire material goods such as their own mansion. Many wealthy people want to donate some of their money to charity. Wealthy people have the good fortune of bestowing good fortune upon others. Identify a very wealthy person in your community. Explain how you would like to send your son or daughter to college, but you can't afford it. If your story is good enough, you might convince a generous rich person to fund your child's college education. Your letter should describe your need and your gratitude. The wealthy individual must feel good about sponsoring your child so make them feel good in your letter. Perhaps this is a long shot, but it might work.
Don't expect someone else to pay for your children's college expenses if you are not saving money on your own. You should be living a frugal life style characterized by modest spending and a humble lifestyle. Don't expect sympathy from others if you drive an expensive car, wear lots of jewelry, go to restaurants and the movies frequently or send your children to a private school with golf lessons in the afternoon.
Student loans are available to most college students. However, these loans do not represent free money. These loans must be paid back with interest when college studies are completed. Imagine trying to pay for rent or qualifying for a home loan while also trying to pay off $25,000 in student loans. Use these loans sparingly. Some parents believe that these loans represent a way to make their children pay for their own college education. Some parents believe that their children should work their way through college and pay for their college expenses on their own. I prefer to believe that a college education is part of our obligation as parents to provide to our children. Providing a good education for our children is part of providing good parenting for our children, therefore, we should pay for it.
The ideal way to pay for college is to plan ahead. If you did not plan ahead and your children are nearing college age, then you must pay for it or use one of the methods suggested above. If your children are young, then you should concentrate on saving appropriately and planning ahead. A previous chapter discussed saving money or more accurately, spending less money. Obviously, you should start saving for this future expense NOW. Whatever money you save and how you save it, is only half the story. The other half is how you "store" this savings so that it will be available for your children when they attend college.
By "storing" the money, I mean are you going to put this money in the bank, the stock market, gold coins, real estate, life insurance, etc.? A return on an investment is either low but certain, or high and uncertain. The choice to invest aggressively or conservatively is beyond the scope of this book, but this is a decision that you must make. I would only recommend that you strongly consider the tax advantages of saving for college. If there is a tax deductible or tax deferred means of savings for college, this should be preferable over a non-tax deductible savings method. For example, the federal tax on some types of U.S. savings bonds gains may be waived if it is used for a college education (under the right conditions). There may be special types of savings accounts that are tax deductible or tax deferred if the proceeds are used for a college education. New tax laws are passed every year. Politicians keep "promising" new ways to afford college. Keep up with the changes to take maximum advantage of government programs, tax deductible or tax deferred savings for college.
There may also be highly sophisticated means to save for college in a tax deductible or tax deferred manner. Such plans generally involve sophisticated organizational structures requiring accountants and attorneys to set up tax deferred professional or family trust entities. The details of such plans are beyond the scope of this book. Consult at least two tax experts for recommendations.