B.E. guide to college financing.How to fund your kid's college education from cradle to sheepskin WHEN JAMES AND MARVIA SAWYER OF GAITHERSBURG, Maryland, found out, they were expecting their first child two years ago, their minds were on more than furnishing a nursery and buying baby clothes. The 30-something couple were thinking about getting a head start on their child's college education. At 22 months, Quest Janae Sawyer is fond of Sesame Street's Elmo. Better still. thanks to her parents, she's cozy with a sound investment plan. The Sawyers opened an Education IRA Education IRA A savings plan for higher education. Parents and guardians are allowed to make nondeductible contributions to an education IRA for a child under the age of 18. when Quest was 2 months old, contributing $500 (the maximum allowed for a calendar year). Although the Education IRA met their initial objective of earmarking  It has been suggested that some sections of this article be split into a new article entitled Earmark (USA). funds for Quest's college education, the Sawyers wanted to do more."At this stage in Quest's life, we can afford to be more aggressive now, while there's time to recover from any potential losses and still be prepared for college," explains James. Taking the advice of a financial planner Financial Planner A qualified investment professional who assists individuals and corporations meet their long-term financial objectives by analyzing the client's status and setting a program to achieve these goals. , they increased their contributions to three growth mutual funds--investing a total of $450 monthly. They are committed to not touching the funds for at least a decade; the savings may be used to cover other educational experiences, such as study abroad or music camp. "We don't want to limit Quest in any way. Whatever her aspirations, we want co have the financial means to support them," says Marvia, an education and development specialist with State Farm Insurance Co. Married for five years, the Years, The the seven decades of Eleanor Pargiter’s life. [Br. Lit.: Benét, 1109] See : Time Sawyers have agreed to sacrifice and save now so that they won't have to play catch-up in the years ahead. Like many concerned parents, they realize that the cost of higher education higher education Study beyond the level of secondary education. Institutions of higher education include not only colleges and universities but also professional schools in such fields as law, theology, medicine, business, music, and art. will continue to escalate--on average, an increase of 7% a year--and much of that burden will fall on their shoulders. Four years at Morgan State University Morgan State University, formerly Centenary Biblical Institute (1867-1890), Morgan College (1890-1938) Morgan State College (1938 -1975), is located in residential Baltimore, Maryland. , for example, could cost $50,000 when Quest goes to college. Moreover, the Sawyers want to spare their child the drudgery of paying back student loans for more than 10 years. "There are so many ways for students to finance their education, including scholarships, loans, work-study, summer jobs, part-time jobs during college, and Pell Grants for the financially disadvantaged," says Gaston Caperton William Gaston Caperton III (born February 21 1940) was twice elected as governor of the U.S. state of West Virginia and served from 1989 until 1997. He is currently the president of the College Board, which administers the nationally-recognized SAT and AP tests. , president of the College Board, the New York New York, state, United States New York, Middle Atlantic state of the United States. It is bordered by Vermont, Massachusetts, Connecticut, and the Atlantic Ocean (E), New Jersey and Pennsylvania (S), Lakes Erie and Ontario and the Canadian province of City-based nonprofit educational association. "But it is critical for families to plan ahead and save whatever they can for their children's higher education." Adhering to a disciplined plan is indeed the best way to lighten the load for both parents and students. Whether your child is 14 months or 14 years old, here's a complete guide to financing a college education. Compound Interest at Work The sooner you start to save for college the better. The following table shows how $100 a month would accumulate at different rates of returns and time periods.
7% 10% 12%
Year 1 $ 1,245 $ 1,267 $ 1,281
Year 2 2,580 2,670 2,725
Year 3 4,020 4,215 4,350
Year 4 5,550 5,920 6,185
Year 5 7,200 7,810 8,250
Year 10 17,410 20,655 23,235
Year 15 31,880 41,790 50,460
Year 20 52,400 76,570 99,910
Source: Don't Miss Out: The Ambitious Student's Guide to Financial Aid, Octameron Associates, 2000 savings and investments An annual increase of 7% a year in tuition costs translates into a doubling every 10 years of the typical bill for college. While you may not be able to save up enough money to pay for all four years, you should save as much as you can afford. A practical goal may be to try to save enough to cover half the cost of college. Bear in mind that not all colleges cost $25,000 a year. In fact, 37% of all undergraduate students go to public two-year colleges, where annual tuition averages about $1,705, according to according to prep. 1. As stated or indicated by; on the authority of: according to historians. 2. In keeping with: according to instructions. 3. the College Board. Another 41% attend state universities, where annual tuition averages $3,510; room and board is an additional $4,060. Those attending a private institution are paying on average $16,332 for tuition; tack on another $6,209 for room and board. If you have access to the Net, sites such as www.financecenter.com offer free calculators to help you figure out how much you need to save to meet your needs. In general, start by saving at least $100 a month, and increase that amount as time goes by. Over 10 years, at a rate of return of 12% (from the stock market), your contribution--$1,200 a year--would grow to $23,235. Are you tight on money or short on time? With college only 12 to 24 months away, put all of your extra cash into a college savings account--tax refunds, year-end bonuses, and cash gifts from relatives--advise Anna and Robert Leider, authors of Don't Miss Out: The Ambitious Student's Guide to Financial Aid (Octameron Associates, $10). You may have to skip a family vacation one year, a savings of about $2,000, or keep an older car for an extra two years, which might save you $300 a month (for 24 months) in new-car payments, the Leiders add. Also, get your kids involved. Encourage them to save their birthday money or earnings from odd jobs odd jobs npl → chapuzas fpl odd jobs npl → petits travaux divers odd jobs odd npl → . Then, offer to match their savings. Don't overlook national and local chapters of black fraternities and sororities
The terms "fraternity" and "sorority" (from the Latin words frater and soror , which give money to college-bound students each year. Religious and civic organizations contribute as well. If there is no chance your child will qualify for aid, consider saving in your child's name. If there's a chance of getting financial aid, save in your name. Financial aid formulas typically require a student to contribute 35% of his or her total assets to college costs each year. In contrast, parents are usually expected to contribute 5% to 6% of their total assets. college portfolio building 101 According to the Leiders' book Don't Miss Out: The Ambitious Student's Guide to Financial Aid. "The composer, on of your portfolio should change with the age of your children. When your children are young, you can afford to take more risks than you can when the tuition bills are just around the corner" Here's one example The Early Years (Under 6). Time is on your side About 90% of your money should be in stock funds, split between aggressive growth (the most risky) and growth and income (less risky). The other 10% should be in something safer like a high-yield bond fund high-yield bond fund An investment company that attempts to produce unusually high income for its shareholders by maintaining a corporate bond portfolio that contains at minimum two thirds lower-rated bonds (Baa by Moody's; BBB by S&P). . The Middle Years (6 to 13). Keep your stock funds, but ... direct new contributions into more conservative bond funds and growth and income funds. The Pre-College Years (14 to 17). During each of these years, start getting out of equities, so that by the time your student turns 17, just 25% of your money is still in growth and income funds. The rest should be in CDs. money market funds, or US Treasury strips that mature during your student's first two years of college. The College Years (18 to 21). Some planners recommend putting everything into CDs and money markets, Others recommend a combination of short-term bond funds Short-term bond fund A bond mutual fund holding short to intermediate-term bonds that have maturities of three to five years. and Treasury strips that mature during your student's last two years of college. In any case, by now your college funds should be out of equities--otherwise you might be forced to sell stocks during a market downturn. college savings plans Section 529 of the tax code allows for two kinds of college savings plans. The first, sponsored by 22 states, are Prepaid Tuition Plans that allow parents to buy tomorrow's college education at today's prices. By making a lump-sum investment or periodic payments parents; are guaranteed four years of tuition at any of the state's public (or in some cases, private) colleges. Over 35 states sponsor the second type, an Education Savings Account Savings Account A deposit account intended for funds that are expected to stay in for the short term. A savings account offers lower returns than the market rates. Notes: . You can set up an account in your name, and the money will accumulate on a tax-deferred basis until you withdraw it. Since the money is yours, 529 programs fare slightly better than custodial accounts bound by the regulations associated with the Uniform Gift to Minors and the Uniform Transfer to Minors acts, where your child is in charge of the account once he or she reaches age 18 or 21 With 529 accounts you get special gift-tax advantages in addition to tax breaks. Moreover, funds in 529 college savings plans accounts are generally invested in securities managed by outside investment specialists. For example, California, Kentucky California is a city in Campbell County, Kentucky, United States. The population was 86 at the 2000 census. Geography California is located at (38.919144, -84.263381)GR1. , Minnesota. Missouri, New York and Vermont invest with TIAA-CREF TIAA-CREF Teachers Insurance and Annuity Association - College Retirement Equities Fund (877-697-2837); New Hampshire New Hampshire, one of the New England states of the NE United States. It is bordered by Massachusetts (S), Vermont, with the Connecticut R. forming the boundary (W), the Canadian province of Quebec (NW), and Maine and a short strip of the Atlantic Ocean (E). and New Jersey invest with Fidelity (800-544-1722); Maine and Arkansas invest with Merrill Lynch Merrill Lynch & Co., Inc. (NYSE: MER TYO: 8675 ), through its subsidiaries and affiliates, provides capital markets services, investment banking and advisory services, wealth management, asset management, insurance, banking and related products and services on a global basis. (877-463-9843); and Colorado and West Virginia West Virginia, E central state of the United States. It is bordered by Pennsylvania and Maryland (N), Virginia (E and S), and Kentucky and, across the Ohio R., Ohio (W). Facts and Figures Area, 24,181 sq mi (62,629 sq km). Pop. invest with Citigroup's SmithBarney (888-572-4652). Keeping Prices in Perspectives Distribution of full-time undergraduates at four-year institutions by tuition and fees charged, 2000-2001 [GRAPH OMITTED] books The B Students (or Lower) Complete Scholarship Book (Sourcebooks Trade, $18.95) The Black Student's Guide to Scholarships: 700+ Private Money Sources for Black and Minority Students by Barry Beckham (Madison Books, $17.95) College Costs & Financial Aid Handbook (The College Board, $21.95) Financial Aid for African Americans 1999-2001 by Gall A. Shlachter and R. David Weber David Mark Weber is an American science fiction and fantasy author. He was born in Cleveland, Ohio in 1952. In his stories, he creates a consistent and rationally explained technology and society. (Reference Service Press, $37.50) The Insider's Guide to Paying for College by Don Betterton (Peterson's Guides, $14.95) student loans If your child does not qualify for a merit scholarship and you have missed the boat regarding other free money sources such as grants, loans can bridge the gap between personal savings and tuition costs. A record $68 billion was made available last year in student financial aid. But much of this growth came in the form of student borrowing. The advantages of student loans are that they are low-interest and have extended payback periods. In most cases, loan and interest payments can be deferred while the student is in school. The downside is that these payback periods can literally extend throughout a person's lifetime (see "College Climb," October 1999). * The Federal Stafford Loan A Stafford Loan is a student loan offered to eligible students enrolled in American institutions of higher education to help finance their education. The terms of the loans are described in Title IV of the Higher Education Act of 1965 (with subsequent amendments), which guarantees Program (previously called the Guaranteed Student Loan Program) permits students who demonstrate need to obtain low-interest (capped at 8.25%) loans through banks, credit unions, savings and loan savings and loan n. a banking and lending institution, chartered either by a state or the Federal government. Savings and loans only make loans secured by real property from deposits, upon which they pay interest slightly higher than that paid by most banks. , or other participating lenders. Students may borrow up to $2,625 per academic year (may vary per state). * The Parent Loan for Undergraduate Students (PLUS) Loans are available to parents of dependent undergraduate students through banks or credit unions. Parents can borrow up to the total cost of education, less other financial aid. * Perkins Loan Program (formerly the National Defense Loan Program) funds are available to low-income students. They are a combination of federal and institutional capital contributions. Estimated Student Aid by Source for Academic Year 1999-2000 (Current Dollars in Billions) [GRAPH OMITTED] websites www.srnexpress.com - a one-stop shop One-Stop Shop A company or a location that offers a multitude of services to a client or a customer. The idea is to provide convenient and efficient service and also to create the opportunity for the company to sell more products to clients and customers. for financial resources. www.finaid.org - provides a host of financial aid information plus links to sites that configure college finances. www.collegeboard.com - tips on college financing plus an online scholarship searcher. www.ed.gov - information about federal financial aid programs. www.collegequest.com - comprehensive database of financial aid and scholarship information. www.collegeispossible.org - financial aid resources. www.fastweb.com - links to scholarship information. www.cashe.com - sources of financial aid and scholarships. scholarships and grants Another source of assistance, comes in the form of grants and Hundreds of millions of dollars in scholarships are available from the federal government and the private sector. There are scholarships for practically every student profile People assume merit scholarships are all about test scores and grades, but many are based on character of special circumstances special circumstances n. in criminal cases, particularly homicides, actions of the accused or the situation under which the crime was committed for which state statutes allow or require imposition of a more severe punishment. . Some even target artists, dancers, and Web designers. "You don't have to be some kind of academic whiz to win cash for college," advises Benjamin Kaplan Benjamin Kaplan is an influential American copyright scholar and jurist. As the Royall Professor of Law at Harvard University, he delivered a series of lectures at Columbia in 1966. The James S. , 23, author of How to Go to College for Free (Waggler Dancer Books, $23.95). "You don't have to possess the service record of a Mother Teresa or the moves of a Michael Jordan This article is about the former basketball player. For other uses, see Michael Jordan (disambiguation). Michael Jeffrey Jordan (born February 17 1963) is a retired American professional basketball player. either." adds Kaplan, who graduated debt-free from Harvard University in 1999 thanks to nearly $90,000 from two dozen merit-based scholarships. Similarly, years ago Marianne Ragins was the recipient of over $400,000 in scholarships. The summa cum laude sum·ma cum lau·de adv. & adj. With the greatest honor. Used to express the highest academic distinction: graduated summa cum laude; a summa cum laude graduate. graduate of Florida University, who now works as a sales manager in Washington, D.C., also offers tips for winning awards in a revised edition of her book Winning Scholarships for College: An Insider's Guide (Owl Books, $12.95). Ragins and Kaplan note the key is to start preparing for scholarships sooner rather than later--the seventh grade is not too early to start. The advantages of scholarships are that they do not require repayment and many can be applied toward room and board and other fees, in addition to tuition Need is generally a prerequisite, but not in all cases. The U.S. Commission for Scholastic Assistance--College Bound offers over 700 different private scholarship sources, Send a self-addressed, stamped No. 10 envelope to: The U,S, Commission for Scholastic Assistance, P.O. Box 668, O'Fallon, IL 62269, Another viable source is the United Negro College Fund The United Negro College Fund (UNCF) is a Fairfax, Virginia-based American philanthropic organization that fundraises college tuition money for African-American students and general scholarship funds for 39 historically black colleges and universities. , The fund-raising consortium administers the Gates Millennium Scholars, funded by the Bill and Melinda Gates Foundation Bill and Melinda Gates Foundation, philanthropic institution founded in 1994 by Microsoft chairman Bill Gates and his wife, Melinda, to improve the lives of the poor throughout the world, primarily through grants for projects relating to global health care, , and targets students of color interested in math, science, and engineering, Call 877-690-4677 or visit www.gmsp.org. In partnership with Merrill Lynch. UNCF UNCF United Negro College Fund, Inc. UNCF United Nations Children's Fund (formerly UNICEF) UNCF Unione Nazionale Cacciatori Falconieri sponsors a two-year scholarship and internship program for sophomores at historically black colleges and universities Historically black colleges and universities (HBCUs) are institutions of higher education in the United States that were established before 1964 with the intention of serving the African American community. They are often liberal arts colleges or universities. . Call 703-205-3400 or visit www.uncf.org. Federal grants are another source of financial aid. The Pell Grant is the largest federally sponsored program that awards free money--up to $1,125 a year based on the amount of money your family is expected to contribute toward college costs, For more information write: Pell Grant Program, P.O. Box 84, Washington, D.C. 20044, The National Association for College Admission Counseling The National Association for College Admission Counseling (NACAC) is an international organization of professionals dedicated to serving students as they make choices about pursuing postsecondary education. (www.nacac.com: 800-822-6285) offers sources for admissions and financial aid. |
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