How to pay for college tuition

Provided by ADVISYS, INC.

College can be a major expense. Here are some strategies to use shortly after a child's birth all the way through college.

A group of young adults smiling after their college graduation ceremony.

At younger ages

If possible, a college savings program should be started when a child is young:

  • Personal savings: Funds put aside by parents or grandparents in taxable investment and savings accounts.
  • Tax advantaged approaches: IRC Sec. 529 plans1, Coverdell Savings Accounts or U.S. Savings Bonds.

The high school years

As college draws closer, continue any savings programs begun in the past:

  • Scholarships and grants: Many college scholarships or grants are awarded to students while they are still in high school.

During college

If savings are inadequate, other resources will be needed. Consider the following:

  • Student aid: Frequently a "package" which may include grants, loans, scholarships or work-study programs, with much of the funding coming from the federal government. Individual states, private individuals and many colleges and universities are also a source of scholarships and grants.
  • Military programs: The U.S. military has a number of programs to enable prospective, active duty and former service personnel to attend college.
  • Tax benefits: Federal income tax law encourages higher education in a variety of ways, including education tax credits and a deduction for student loan interest.2
  • Other approaches: The cost of education can be reduced by living at home or choosing a lower-cost state or community college. A home-equity loan or a loan from an employer-sponsored qualified retirement plan may provide additional funds.

After graduation

For some students, paying for college extends beyond the college years:

  • Perform any required service: Some programs require the student to perform a period of service or work after graduation in return for help in funding college.
  • Repay student loans: Any outstanding loans should be repaid as quickly as possible.

1 Federal income tax law does not allow deductions for contributions to "529" plans, although growth inside a plan is tax-deferred and qualified distributions are tax-exempt. State or local tax law, however, can vary widely. 529 plans involve investment risks, including possible loss of funds, and there is no guarantee a college-funding goal will be met. The fees, expenses, and features of 529 plans vary from state to state.

2 These comments concern federal income tax law; state or local income tax law may vary widely.

These materials were reproduced with the permission of Advisys, Inc. No State Farm® entity prepared these materials nor does State Farm represent or warranty the opinions or statements expressed therein. These materials are being provided for information purposes only.

The information in this article was obtained from various sources not associated with State Farm® (including State Farm Mutual Automobile Insurance Company and its subsidiaries and affiliates). While we believe it to be reliable and accurate, we do not warrant the accuracy or reliability of the information. State Farm is not responsible for, and does not endorse or approve, either implicitly or explicitly, the content of any third party sites that might be hyperlinked from this page. The information is not intended to replace manuals, instructions or information provided by a manufacturer or the advice of a qualified professional, or to affect coverage under any applicable insurance policy. These suggestions are not a complete list of every loss control measure. State Farm makes no guarantees of results from use of this information.

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