The Best Ways To Finance Your Child’s College Education

The cost of a higher education is well-documented. The average American family spent over $26,000 on tuition in the 2019-2020 academic year. Still, there are some ways to lower the burden for yourself and your child. Here are some options for financing your student’s education.


Taking out student loans may seem scary. Yet loans can help you and your child cover the costs that you would not be able to afford otherwise.  

Start by researching federal loans. Unlike private loans, government loans offer forgiveness programs. Federal loans typically have lower interest rates, as well. While your child may be offered a lot of federal aid, he does not have to accept all of it. Ideally, his student loan payments should not exceed 10 percent of his projected monthly net income the year after he graduates college.

The PLUS loan is a common choice for parents.  It should cover the cost of college attendance, though the school itself will decide how much you can borrow. You will need to pass a credit check before you are approved for this loan. PLUS loans also typically feature higher interest rates.

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You may thus want to look at private student loans instead. There are many different options, which allows you to shop around and pick the one that works best for you and your child. Ideally, you will find a loan that offers low interest rates and flexible repayment plans.If you encounter problems paying these loans, there are private loan settlements that will help you manage your debts after you graduate college.

Federal Grants                                                    

Both the federal and state governments award grants to students who need financial assistance. To find out if your child is eligible, have him fill out the Free Application for Federal Student Aid, or FAFSA. Even if you do not think your child will qualify, you should still have him submit the form. The FAFSA also makes a student eligible for certain loans and work-study programs.

To determine a student’s financial need, the FAFSA typically uses data from two years before the application is submitted. For instance, if your child files the 2021-2022 FAFSA, he will have to include financial information from your family’s 2019 tax returns. Of course, economic circumstances can change quickly. If you or your spouse got laid off or took a pay cut between 2019 and 2021, you can ask the college for a financial aid appeal.

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Unlike loans, grants do not have to be repaid. One of the most well-known options is the Federal Pell Grant. It typically goes to students whose families earn less than $30,000 per year.

The United States Department of Education website lets you see which agencies in your state offer grants. Your child may also apply for a grant from the college itself.  


Many organizations offer scholarships to incoming freshmen. In fact, the average college student received $7,626 in grants and scholarships during the 2019-2020 school year. This was enough to cover about 25 percent of the total college cost.

Find out if your employer offers scholarships for children of employees. Your local community organization, such as the Rotary Club, may have scholarship opportunities, as well.

You should encourage your child to get started on his scholarship search early. His high school guidance counselor should offer some suggestions. Your child can also use free online services that show scholarships for which he is eligible.

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Savings Accounts

One study found that parental savings and income covered 45 percent of college costs from 2020-2021. The most popular savings option is a 529 plan. As long as the money in this account is spent on qualified education-related expenses, the savings will grow tax-free.  

Tax Credits

Depending on your income, you may qualify for a tax credit that will give you more money to spend on your child’s education. The American Opportunity Tax Credit offers up to $2,500 annually per child. You can claim the credit if your modified adjusted gross income (MAGI) is less than $90,000. If you file your taxes jointly with a spouse, your combined MAGI can be no more than $180,000.

Do not let finances prevent your child from attending the college of his dreams. The above tips should help him pay for schooling without incurring massive debt.


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