Paying for College? Your Questions Answered
We recommend the best ways to save and where to find free money.
By Kimberly Lankford, Contributing Editor
From Kiplinger's Personal Finance magazine, September 2005
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Cal Brown has some reassuring advice for parents who are stressed about how to pay their kids' college bills: Chill. "Don't get too freaked out," says Brown, a financial planner in McLean, Va. "Whether you're rich or poor, there's money available."
Brown isn't just talking through his financial planner's hat. His son, Ryan, is about to begin his third year on a full-tuition scholarship at Georgia Southern University, in Statesboro, Ga. Ryan qualifies for the free ride because he's a Georgia resident (he lives with his mother) and maintained a 3.0 grade-point average in high school and now in college. In some states, it's surprisingly easy to get a full-tuition scholarship, regardless of your income.
Anticipating tuition bills that can now exceed $100,000 for four years at a private school, Kiplinger's readers often ask how to find free money for children who are about to start college. Meanwhile, parents of younger children want to know how to make the most of their college savings.
For example, Emma and Greg Lee of Dublin, Cal., have invested in California's state-sponsored 529 college-savings plan for their 2-year-old daughter, Juliette. They'd like to know if they can also open a 529 account in New York, which has lower fees.
Yes, they can. But they should also keep their California plan because it has a number of attractive features and the difference in fees isn't significant.
You, too, can invest in as many 529 plans as you wish. Opening more than one account could be especially helpful if your state's plan offers an income-tax deduction for contributions (about half the states do) but doesn't offer the lowest fees or the best investment options. In that case, you could divide your money among your home state's plan, to take advantage of the tax deduction, and other plans with more attractive fees and portfolios (get our take on the best -- and worst -- 529 plans).
Below is a sampling of other questions in our mailbag. To get free, customized advice that addresses your specific situation, take advantage of Kiplinger's How to Pay for College hotline. From 9 a.m. to 6 p.m. eastern time on August 12 and August 26, you can call 888-919-2345 and put your college-financing questions to members of the National Association of Personal Financial Advisors.
I have a 3-year-old daughter, for whom I'd like to invest $15,000 for college. I want to make a one-time investment that I can forget about. What do you recommend?
Open an account with a state-sponsored 529 plan and put the money in an age-based portfolio. Your money will be invested in a group of mutual funds determined by your child's age; it will be shifted automatically from riskier investments to more conservative ones as college bills get closer.
Parents who think a state's age-based portfolio becomes too conservative too soon may be able to make it more aggressive by putting money for a 10-year-old, say, into a portfolio designed for 6-year-olds, advises Evelyn Zohlen, of Inspired Financial, in Garden Grove, Cal. "Some portfolios are 100% in bonds by the time your child is 14, but I think you need to have some stock investments until your child enters college," says Zohlen.