As you send your son or daughter off to college, you have a lot on your mindwill they be OK on their own, will they eat right, will they call? If you're like many parents, you're probably also wondering how you'll pay for the next four years.
Many middle-class families are stuck in college tuition limbothey make too much to qualify for financial aid, yet don't make enough to comfortably cover ever-rising tuition costs. For many families, a home equity loan or line of credit is a good option.
A home equity loan provides you a lump sum, while a home equity line of credit, sometimes called a HELOC, functions more like a credit card that you can use as needed. 'Using the equity you've built up in your home to help pay for college can be a smart choice,' says Matt Coffin, president and founder of LowerMyBills.com, a free online service where consumers can shop around for the lowest rates on monthly bills and reduce the cost of living.
Chances are the interest rate on a home equity loan or line of credit will be substantially lower than the interest on your credit cards. And in many cases, the interest payments on a home equity loan are tax deductible, making them even more attractive. To get the best rates and the most appropriate loan for your needs, it pays to shop around for the best deal.
Tuition is just one of the many expenses that goes along with school. There are many other small and large costs from dorm room furnishings and text books to electronic necessities like cell phones and computers. 'Shopping for these items with your college-bound student is a great opportunity to provide your child with some financial coaching and teach them about budgeting, prioritizing and spending wisely,' says Coffin.
For example, if they have their eyes on a particular item, show them how to comparison shop to get the best deal. For some items, like their stereo system, this might involve trips to local stores, comparison shopping on a Web site like www.PriceGrabber.com, and keeping an eye out for sales.
For other items, such as cell phone service or Internet access, comparison shopping is as easy as visiting LowerMyBills.com. The Web site is a great resource for both students and parents (since you're probably paying the bills). Simply log on, check and compare the deals available and find out where to get them in your area. The Web site also provides easy comparison shopping for long distance calling plans, which can help you save on calls home from school.
Another way to teach responsible spending is with a credit card. A recent study showed that more than 92 percent of college students will have a credit card by their sophomore year. And nearly one in four college students owe more than $3,000. Talk to your kids about building good credit and how late payments and credit card debt can negatively affect their credit, as well as other ways to control their spending, such as making and following a budget that includes monthly spending limits.
Of course, paying off the credit card balance in full every month should be the goal, but in reality, that doesn't always happen. Explain to your child how paying interest can really add up and teach them to look for cards with the lowest interest rates and no annual fees.
A little coaching on 'Finances 101' can help your student make the transition to living on his or her own with fewer pitfalls. |
| Author: Norman Anderson |
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Author Bio:
For more information on the tax benefits of life insurance and variable annuities, or to learn more about no-load products, go to www.ameritasdirect.com, or call (800) 552-3553. Ameritas Direct??s customer service team is salaried, not commissioned, so their focus is on helping you find the best product for your needs. Variable life insurance and variable annuities involve investment risk, including possible loss of principal. - ARA |
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