Many alternatives exist today to fund college education for your children. Among the options are:
. Pay as you go. This might have worked when college students were wearing tie-dyed T-shirts (the first time they were popular.) Now the cost of four years of education at some private schools approaches the cost of a home. Only the very wealthy can pay tuition bills as they arrive.
. Let the kid pay for it. Well, it will help them learn self-reliance, but what lawful, part-time job pays enough to offset the $10,000 to $20,000 it now costs to go to school?
Get a scholarship. This plan works well if you qualify for aid or your child is a great athlete or student. What do you do if your child is none of these or if he/she is too young to display their talents?
While scholarships, grants and the like may not be a viable solution for everyone, do not discount them entirely. Many scholarships and awards are available, and some go unclaimed because eligible students do not seek them out. Several states offer scholarship plans to eligible graduating seniors.
Be sure to keep updated on eligibility requirements and coverage for these state plans.
. Borrow it. This worked really well when the government was happily making below-market loans not based on financial need. Rules have tightened considerably, although loans may be a viable option for those who refuse to plan.
However, remember that Baby Boomers had children later in life. If mom and dad are going to borrow the money, do they really want a new, long-term debt obligation when they may be in their late 50s or 60s?
. Get the money from grandpa and grandma. This may work well if grandpa or grandma has the money, doesn't need it to live and is willing to give it to your kids. Otherwise, it's best to plan.
. Pay now, learn later. Several states have adopted programs under which parents can make lump- sum payments to a trust fund and guarantee that tuition, and sometimes other costs, will be paid at an in-state school for four years. On the surface it sounds great. But what if the kid wants to go to school out of state or you move or he/she just doesn't want to go to college? These and other drawbacks need to be examined.
. Save now, pay later. A systematic program of savings and investment may be old fashioned, but it works. Yes, you have to decide if the savings will be in the parents' name or the child's. There are numerous tax and non-tax ramifications to that decision.
Once that is settled, the risk-management aspects can be addressed (i.e. what if you die before junior goes off to college?).
Next, consider tax-deferred saving vehicles that will help minimize the impact of income taxation during the savings period, for example, 529 savings plans and Coverdell education savings accounts.
Lastly, use investment alternatives that suit your style and risk profile.
No one solution will work for everyone. Consult with your financial advisor to find the solution that fits your situation.
Marc P. Tomberg is branch manager at Raymond James Financial Services. His office is located in Ryanwood Square at 2140 58th Ave, Vero Beach. He may be reached by phone at (772) 778-4399.