Q. What's the best way to pay for college? We won't get much financial aid and I think it will cost about $30,000 a year. We only have $40,000 saved. We have equity in our home, 401K plans, Roths and our son can take student loans. Help!
— Mom
A. There is no one best way to pay for college, but we want to give you some options to consider.
Like a lot of people, you might be surprised by how much of the bill won't be covered by aid.
The first option to look at is scholarships, said Lisa McKnight, a certified financial planner with Lassus Wherley in New Providence, New Jersey.
Free money is the best money, she said.
"Consider schools where you child stands out academically for your best bet at scholarship offers," she said. "You should also consider the many scholarships found within your local community."
McKnight said high schools typically have resources for students to help them find scholarships. One other resource is The College Board, which has an extensive database of scholarships.
Next, your student should investigate work/study programs or working during school, McKnight said.
"Student employment via a federal work/study program, or even part-time work outside of a work/ study, is a great way to have the student help finance their education," McKnight said. "It's important to balance working with academics, so you will need to determine if you're student is someone who can make both work."
You won't necessarily have to make a whopper payment for tuition. While universities will bill for each semester, it seems that coming up with a full semester's payment all at once would be tough.
But, most schools offer payment plans that allow you to stretch payments out over the course of 10 months or a year, McKnight said.
Next, you'll probably need to consider loans.
"Even parents who could afford to pay for college out-of-pocket may choose to make student loans part of their college payment strategy in order to avoid asset liquidation or to give their child some responsibility for his or her own education," McKnight said.
You'll need to see what federal loans you and your child are eligible for. Be sure to look at Direct Subsidized and Unsubsidized Loans and Direct Parent Plus Loans. You can find private loans too, but these often require a co-signer.
In looking at home equity, there are pros and cons here.
"It may be cheaper and easier to secure then a federal loan, it has fewer restrictions, and is tax-deductible," McKnight said. "However, there are some significant cons — primarily home equity loan debt is secured by your home, giving the lender a legal claim to your home in the event of default."