(BPT) - Sending a student to college is a proud time for families. But with tuition costs rising and families continuing to face financial challenges, many are taking another look at how to pay for college.
According to the latest Merrill Edge Report, 56 percent of parents have paid or expect to pay more to send their first child to college than they had originally anticipated when the child was born. When asked why they are paying more, one in three parents who currently have a child in college or have one that has graduated said it was to keep their child out of debt.
“Paying for college is a big priority for our clients and with costs continuing to rise, we're telling them it's never too early or too late to readjust their financial plan for the true price of college,” says Dean Athanasia, preferred and small business executive at Bank of America. “Though it's daunting, there are many steps you can take to prepare to send your child to school.”
Estimate the costs
The first thing you should do is estimate how much college will cost and what you can afford. To do this, you can take advantage of a number of tools online, such as Merrill Edge's College Planning Tool.
Once you calculate how much you're able to spend, sit down as a family and go over your finances. Establish how much you're able to afford and how you'll pay for any additional costs that arise - for example, through your child taking on part-time jobs or student loans. Your child may have his sights set on a more expensive school, but after analyzing your finances your family may decide a more affordable university closer to home is the way to go.
It all depends on your financial plan, but the sooner you can start saving for college, the better. Among parents who saved for college, 68 percent began doing so before their child reached the age of 6, according the 2011 Merrill Edge Report. And of those parents who saved, 38 percent wish they began earlier.
There are specialized ways to save for college education. Some college savings plans offer favorable tax incentives and flexibility in who can contribute to the plan, giving you more opportunity to save. In order to decide which account best fits your financial plan, conduct research on your own or ask a financial adviser for help. Once you do, set up an automatic withdrawal from your paycheck to ensure you're putting some money away each month.
Find additional funding
If their savings aren't enough, many families consider financial aid, such as Stafford and Perkins loans. The important part of taking out loans is for your child to have a plan to pay them back, which can be a struggle without proper consideration.
Grants and scholarships remain an option but beware that the current economy has restricted many of these funds and they are therefore becoming scarcer than in the past.
In the end, remember that you're saving for a great cause, however expensive it is. By planning ahead, saving early and supplementing your savings with the variety of resources, your child's education can be one of the richest investments you make.