Paying for College

From saving early to navigating student loans and work-study, students have choices.

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Most parents hope their children will attend college to enhance future earning power, but being accepted into a school and paying for it present different challenges. Strains on the pocketbook and incurring debt must be considered; luckily, with a bit of digging, answers are available.

Oklahoma Baptist University, typical of higher learning institutions in the state, offers financial counseling, advice on the Free Application for Federal Student Aid (FAFSA) and information on scholarships, work-study programs, loans and grants.

“We meet with any student or family … to discuss financial options for paying for college,” says Jonna Raney, OBU’s director of student financial services. “We give them information about college savings plans and tax credits.

“We caution about borrowing more money than is needed for actual costs of their education. We encourage budgeting as much as possible to pay as they go for any balance not covered with grants and scholarships.”

Saving for college as early as possible is ideal. Forbes magazine, in a 2015 article, writes: “Time is your greatest asset. If you start saving from [the child’s] birth, a third of your college savings goal will come from your earnings. If you wait till the child enters high school, a tenth of the goal would come from earnings and you would have to save six times as much per month.

“The best investment vehicle for saving for college costs is a 529 savings plan, which functions similarly to a Roth IRA in that your contributions will be taxed but the earnings will not. Set one up either right after the child’s birth or even before (designating yourself the beneficiary and then changing it to your child after he or she is born).”

When choosing colleges, many teens do not have the luxury of long-term savings plans behind them, so OBU focuses on helping students in high school or community college.

“Make that transition to meeting the financial obligations of a university education,” Raney says. “Do not let the initial cost figures deter them from applying to their first college choice. For example, 100 percent of OBU students receive scholarships from the university, so no entering student will pay the full costs. It’s free to apply to OBU and to complete the FAFSA, so it costs nothing to get a financial aid award to see if it’s affordable. Many students and families are pleasantly surprised.”

Timing is key when it comes to a successful FAFSA, she says. Families should complete the FAFSA as soon after Oct. 1 of the year preceding the student’s entry into college. It must be completed every year. A high school senior’s fall semester is the best time to apply for scholarships after doing diligent research through the summer. Most have Nov. 1, Dec. 1 or Jan. 1 deadlines. At OBU, work-study jobs are typically posted during the summer before the fall semester and as openings occur during the academic year.

Both Forbes and Raney suggest professional financial expertise and point to how most states have easy-access college savings plans. Contributions are usually tax deferred so it’s a good investment in the child’s future. To maximize the gifts of, for example, generous grandparents, Forbes suggests breaking such numbers into one-year increments given to the parents to avoid inflated income statements scrutinized for FAFSA purposes.

College spending goes beyond tuition and housing, and Raney says incidental costs depend upon the standard of living the student desires as well as the amount of debt the student brings to college, such as a car payment or credit card debt.

When money won’t quite stretch to cover the first year of college after high school, Forbes points to the time-honored strategy of living at home for a year or two and attending community college while saving to finish up a degree at a four-year institution.

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