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Save for Your Child's College Education

  • Ellie Kay Founder of the Shop, Save and Share Seminars
  • 2002 28 Feb
Save for Your Child's College Education
Start Early
Please don't get me wrong. I don't think there's anything wrong with parents helping their child go to college; I'm just opposed to parents providing a full free ride without the child earning a portion of his education.

It's wise to start putting away money for college early-while they're still babies. You may want to start a custodial account at your local bank. These are irrevocable gifts to the child and up to $700 per year of the investment income is tax-free. Once the fund has grown beyond $10,000, you're probably better off putting additional capital in either an education IRA or one of two state tuition programs (see below).

Education IRA
This is a relatively new program that is available through banks and brokerages. This option allows annual contributions of up to $500 per child under 18, provided the donor meets certain income criteria. No taxes are owed on withdrawals used for college expenses as long as the student is under age 30. The only drawback to this plan is that you may not be eligible for education tax credits later on. It would be best to consult IRS Publication 970 or visit on the Internet before investing in this plan.

Prepaid Plans/State Tuition
With a prepaid plan you can avoid future increases by buying credits in advance at today's rates. Most states will allow you to redeem the cash value of the credits at other institutions, including private colleges and out-of-state public schools. You may want to look at other options, depending on the current tuition inflation rates. This plan is tax-deferred. To further investigate this plan or the next one (Savings Account), you can call 1-877-277-6496 or visit on the Web.

State-Sponsored Tuition Savings Accounts
These accounts can be used to pay for any accredited college or university. In this savings account the funds are managed professionally by state employees or contracted investment firms. The main drawback is that once you invest, you forfeit control and can't close the account without a large penalty.

The main advantage of this plan, as well as the prepaid state tuition plan, is that they have a tax-deferred status. The earnings are taxed at the student's lower rate as they are withdrawn.

Just because a high school graduate is accepted to the college of her dreams doesn't mean she is entitled to go to that school. College should be a matter of what the family can afford, not what kind of school your child can get into. Students and parents need a reality check in this area. Acceptance into college needs to be balanced with an acceptance of what you can afford without becoming indebted for the next twenty-five years.

Some people think, "I'll just figure out what I want and then try to figure out how to pay for it." The people spouting this kind of dogma are usually the same people who are in debt up to their eyeballs.

Community Colleges
The first two years of basics can be completed at a junior college or community college and then transferred to a four-year university, which will issue the diploma. The diploma doesn't indicate that the graduate paid a fourth of the cost of school those first two years. All you have to do is check with a counselor at the four-year university to make sure those courses will transfer.

Advanced Placement
While a student is still in high school, in the summer before school starts or even after they have started classes, they can take advanced placement tests. The fees on these tests are nominal, but a student can receive credit for a variety of subjects and have those credits apply toward a degree. All it will require are some hours of study and preparation. I received an entire semester of credit for advanced placement in Spanish. ¿Cómo que no?

College Classes in High School
Another option that saves big money is to take college courses-at little or no additional expense-while still in high school. (In some parts of the country this is called Post Secondary Option, or PSO.) Talk with your school's counselor or principal to determine if this option is available for your student. Here are just a few Web sites you can visit for more information:

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  • #Dual Enrollment

Military Options for College
Military Academies: In these institutions, the education is free, but cadets pay for their education with very hard work. In addition, they are paid around seven thousand dollars a year. A military academy is not for everyone-it is extremely challenging academically, physically, and emotionally. Only the top 10 percent of eligible applicants will get into major service academies (U.S. Air Force, West Point, Annapolis). They are the créme de la créme, and grooming for these institutions begins early in high school. A résumé that includes a degree from any of these schools is extremely impressive in corporate America. ...

ROTC (Reserve Officer Training Corps): These programs offer scholarships to future military officers at local colleges. Some ROTC scholarships go unused because of a lack of applicants.

Active Duty/Reserve Military: By joining the military, a young person can learn a trade and earn money for college as well.

Frugal Alternatives
State Schools: There are plenty of fine state schools that offer reduced tuition for residents. The price difference between a state and private school is astounding. You will find that all expenses can be covered (including room and board) at a state school for the same price as tuition alone at a private school.

Living with Family: Room and board are oftentimes the most expensive part of college. By living with parents, grandparents, or other relatives, a student can pay as he goes in school because he doesn't have this major expense. We have no problem with one of our children living at home while earning his way through college.

Work-Study Programs, Employee Benefits, Corporate Benefits: Check with the college of your choice and see if they have work-study programs available for students. These are federal programs that provide jobs for students on campus and the college administers the jobs.

Most colleges have plenty of jobs that don't involve teaching. These schools oftentimes allow children of employees to receive free tuition. One of my best friends went to Texas Christian University (TCU) that way, and another retired Air Force friend paid for his son's college by choosing to work at a small college.

Last but not least, if you haven't finished your education and always wanted to, ask your employer if they have benefits that will pay for courses. Usually this is done as a reimbursement for the courses you take, and there are qualifying factors that they may impose.

Delay for a Year or Two: Bob and I counseled a young lady who graduated from high school at age sixteen and immediately went to Columbia University. The financial pressures were unbearable when combined with her age, the distance from her home, and living in a big city. In addition, the demanding course work added more pressure to this student. After her sophomore year, she took a two-year sabbatical to work full time and earn money to pay for school. She's back at Columbia, and the pressure is greatly reduced from that of a couple years ago. She doesn't have the tension of working all those extra hours while in school, and she now has much more time to study. She will graduate soon and have minimal debts for her excellent education due to keen financial decisions on how to pay for college.

Knit Your Way Through School-Assorted Scholarships: In the Family Support Center at our base, the education staff will research scholarship information for people seeking to go to school. A friend of mine got two, one-thousand dollar scholarships from the American Wool Association because she listed her hobby as knitting. This scholarship had gone unawarded for two years because no one applied!

Go to the library and look at Paying for College Without Going Broke, by Kalman A. Chany. This is a handbook for minimizing out-of-control college costs. The book includes advice for special circumstances from single parents to independent students. It also gives information about how to find scholarships, how to find the best lender for occasional educational loans, and information on the recent tax law's impact on financing college.

The National Scholarship Research Service is an organization that has been around for twenty years. You can do your own search on their Web site at, or they can do a search for you for $185 (this service is done free on most military bases). You can also contact them at 1-707-546-6777 or at their mailing address: 5577 Skylande Boulevard, Suite 6A, Santa Rosa, CA 95403.

Internships: Check out The Internship Bible, by Mark Oldman and Samer Hamadeh, at your local library. A new edition is published every year. This resource gives thumbnail sketches of essential information on nearly every internship in the country-more than ten thousand opportunities every year. The book tells prospective interns about application deadlines, compensation and perks, selectivity, and more.

There are also quite a few Christian programs and schools that can give you information about their internship programs. Focus on the Family has one of the most selective and comprehensive programs in the Christian arena; call 1-800-A-FAMILY for more information. The Home School Legal Defense Association also has a great program for students; contact them at 1-540-338-5600.

Excerpted by permission from How to Save Money Every Day copyright 2001 by Ellie Kay. All rights reserved. Published by Bethany House Publishers, Minneapolis, Minn.,, 1-800-328-6109.

Ellie Kay knows the value of balancing household responsibilities and a pocketbook. She and her husband, Bob, a Stealth fighter pilot, moved eleven times in thirteen years and have five school-aged children.

How are you saving money for your child’s college education? Do you have a child already in college? If so, how did the savings plan you used to prepare work out for you? Visit Crosswalk’s forums to discuss this topic by clicking on the link below.