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So your teenager has decided to go to college. You've hoped for this day. You sweated through 12 years of school with your child, and have been an active participant in his/her education. You've been saving for this day for years, but with all the other "incidentals" of daily life, car expenses, medical bills, that new roof, the money you had hoped you'd have is not there. What you have is not quite enough for that four year private college he/she is interested in attending, and you don't want a home equity loan. What to do?
Today there are many federal and private loans available to help parents and students pay for college expenses. There are also billions of dollars in scholarship aid and grants available, you just need to know where to look. Some of these monies come directly from federal and state governments, others are from private sources. Generally, scholarships and grants, which do not have to be repaid, and are based on the student's ethnicity, financial need, intended major, and GPA and SAT scores.
The first course of action would be to try to obtain a college scholarship or grant. There is grant money available through the federal government Pell Grant. To apply for this grant, the student must complete a FAFSA, or Free Application for Federal Student Aid. The amount a student receives is based on the actual school cost and the amount the family will pay. The student could also check with his or her high school guidance counselor. The guidance counselor will know what scholarships are available if the student will be attending a college in the local area. Check with local community organizations and local businesses for possible scholarship availability. Another place to search for scholarship money is the college that you are interested in attending. Most colleges have what are called institutional awards. You can check the college website or catalog for these.
There are loan programs available to the parents, or to the student, at generally low interest rates. One federally funded loan program for parents is called PLUS Loans. Under this low interest loan program, parents can borrow up to 100% of college costs and the interest may be tax deductible. There is no collateral necessary and no pre payment penalty. The Federal Stafford Loan is a low interest loan made to the student. This is a deferred loan, meaning that loan payments may not start until the student graduates.
One such plan was developed for the staff and families of colleges in the State of New York. New York's College Savings Program is designed to help families of all income levels save for this important goal.
It works through payroll deduction and employees can enroll for as little as $15 per pay period. These deductions are made on an after-tax basis.
The program offers New Yorkers an annual New York State income tax deduction for contributions of up to $5,000 for individuals and up to $10,000 for married couples filing jointly. When the money is used to pay for your beneficiary's qualified higher education expenses, you will also not have to pay federal or New York income taxes on earnings. Qualified withdrawals are completely income tax free.
Anyone - parents, grandparents, uncles, aunts, friends - can establish an account, regardless of state residence. To get started with payroll deductions you submit a completed application to the program and ill receive a confirmation form attesting your enrollment. You then advise your Payroll department and the deductions start in our next pay period.
The funds that you deposit can be used at eligible schools anywhere in the country and are not limited to the state in which you enroll. The funds can be used for educational expenses, including tuition, fees, supplies, books, and equipment required for enrollment. Most room and board expenses are also covered for students enrolled at least half time.
You can and should open account for each child in your family because each account can only have one designated beneficiary. You can be the designated beneficiary yourself, but you may designate anyone. The tax benefits are not contingent on the beneficiary being a family member of the account owner. Even if you move out of state you may keep contributing money to the account and continue to enjoy the benefits of federal and New York State tax-deferred growth.
Check and see if your employer, institution, association or union has a similar education savings program that you can apply to join. It will make saving for a college education much easier and a lot less frustrating for everyone involved.