Higher Education, Higher Expense: Budgeting tips for college students and parents
High school graduation should be a time of celebration. But for a lot of families, it can also be a source of stress. College is a big step into the future for any student – and it comes with a hefty price tag.
According to a 2015 survey, the top-ranking financial worry for parents with children under the age of 18 was paying for college. The study found that budgeting for higher education costs was the chief concern for 73 percent of applicable parents. The same study found that financial concerns around budgeting for college were even prevalent in higher-income households. Sixty-one percent of homes earning $100,000 or more a year expressed concern.
When you look at the costs of tuition today, it's easy to see the cause for concern. So what can you and your family do to make college more affordable for everyone? Start by following these tips.
Seek out grants
To help ease the burden of college expenses, it’s a good idea to apply for as many grants as possible. Grants come from multiple sources including the government, organizations and even some private companies or estates.
A grant is basically funds awarded by one entity for a specific purpose. College grants are one of the most common and there are several online resources you can use to search for grants. Start with grants.gov and expand your search from there. You never know what you will find.
Keep a close eye on your budget
The 70-20-10 rule makes for a helpful guideline when saving for college. Under this rule, 70 percent of your money is allocated for living expenses -- such as the mortgage, food, clothing and gas -- 20 percent goes into savings and 10 percent is allotted for debt. Set up your own model and set aside a set percentage of your savings to be allotted for college (say 5 to 10 percent) and try to hold true to these numbers as much as possible to support your total savings and budgeting goals. Vanderbilt’s 2017 Home Loan Guide includes an excellent article on budgeting, along with an interactive budgeting sheet to help calculate your expenses.
“Budgeting is a roadmap to financial success built around your personal income and expenses,” said Eric Hamilton, President of Vanderbilt Mortgage and Finance, Inc. “Whether you’re saving for your first home or a college education, the importance of building and following a budget plan cannot be understated.”
College tuition is one of the largest expenses most people will incur in their lifetime – until they purchase their first home. So for parents who are helping with their child’s college expenses, shouldering both can be difficult to manage. If you find yourself in a difficult situation concerning your mortgage payments, be sure to contact your mortgage loan provider to see what programs they may be able to offer to help keep payments on track. But the best defense is a good offense. Planning ahead and putting aside funds for college tuition will help reduce or eliminate any impact paying tuition may have on your financial stability.
It takes a village to raise a child, and it takes an entire family to send them to college, so work together as you save for this goal. Educate your student on how to save, both for college and in life. If they already have a part-time job, set tangible goals for their savings — as you have done for yourself. For example, estimate the cost of books for the first year and work with your student to set a monthly savings goal that will help them achieve that number.
This will relieve some of your financial burden and ensure your student has a vested stake in their entire college experience.
Start saving today
There’s no time like the present to start building a college savings fund. With careful planning and a little teamwork, you all can emerge on graduation day with degree in hand without a mountain of debt.
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