College Saving -- Down to the Wire

College Saving -- Down to the Wire

Tassels, caps, gowns and football season  these are the sights that trigger high school students' dreams of college, but they can alsopoint to a financial nightmare for parents facing college costs. According to 2013 estimates from CollegeData and other sources, the average cost of public college stands at above $20,000 a year, and nearly double that for a private university!

How do families handle these costs? There is no miracle solution for financially strapped parents with only a few years to raise funds for their child's college education, but there are several investment vehicles that can help.

For instance, with children more than five years away from college, growth-oriented portfolios offer an investment direction, and return potential for parents to grow the money that they need for tuition and more. Parents should be careful to keep the assets in the parent's name, instead of the child's. This keeps the child from spending the money on something other than a college education when he or shegets legal access to the money.

Experts usually recommend a more conservative investment approach if the child will attend college in three to five years. This helps to handle risks related to situations where college investments take an untimely dip the summer before enrollment. A balanced portfolio with a mix of equities and bonds is a conservative investment approach that attempts to minimize this risk through diversification.

For families with only a year or two ofthat big first day, short-term, fixed income investmentsmay offer the necessary liquidity and safety of principal. If a family needs to protect its principal, the best route to take may be short-term investments, such as U. S. Government notes, money market mutual funds, and bank CDs that can all provide some short-term stability.

For families in immediate financial need, a last-minute option may include securing a home equity loan, where the interest paid on the loan may be tax deductible. Another option might entail loaning to oneself by borrowing from a 401(k) retirement plan. Of course, this would only be possible if the particular retirement plan allows for it.

Finally, unless the total amount needed to pay for a college education is saved, students should apply for any type of financial aid available to them. This includes any grants, loans, or scholarships for which they qualify. Of course, all of these recommendations must be considered in light of your particular financial circumstances. Be sure to consult a financial planner to help you choose the best last-minute options.

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