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Archive for the ‘Paying for College’ Category

The main types of programs that will help you eliminate student loan debt include:
* service-based work activities, such as becoming a police officer, firefighter or social worker
* volunteer work, such as joining VISTA or the Peace Corps
* working for the federal government and taking advantage of the Federal Student Loan Repayment Program
* working in the medical arena as a doctor, nurse or other specialist, in places where there is a critical shortage of healthcare experts
* enrolling in the armed services (i.e. Army, Navy, Air Force or Marines)
Read this post on how to pay off student loans fast, including getting help from student loan assistance programs. Also, refer to my book Zero Debt for college Grads for an extended list of specific programs to help you tackle student loan debt.

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• CNN: Got Student Debt? Give Yourself to AmeriCorps or the Peace Corps (newsbusters.org)

This is a classic case of “which should I do first – pay debt or save more”? The answer isn’t really a matter of either/or. It’s a question of how to do both simultaneously because that’s the best approach. You need savings to avoid going into debt. After all if you don’t have a cash cushion, the slightest emergency – like a flat tire or a leaky roof – will send you heading for your credit cards. Also, you should pay off debt as soon as possible because you don’t want to pay unnecessary interest charges and be prevented from saving money for other future goals. The good news for your situation is that both of the loans you’ve taken on – school debt for your son, and a home equity line of credit – carry relative modest interest rates. You didn’t say when you got your HELOC, but I assume it’s in the single digits (i.e. less than 10%, and probably significantly less if you got the loan in the past couple years). Ditto for that student loan. So divvy up the available cash you have and work at meeting both objectives: knocking down that student loan balance and your HELOC and also adding consistently, month after month, to your savings nest egg. If I had to prioritize, I would say slash that HELOC debt first and put more emphasis on that than the student loan debt. If it’s a federal loan, the student loan debt may be subsidized (meaning the government is paying the interest on the loan while your son is in school). Lastly, because the healthcare reform bill recently signed into law by President Obama includes student loan reform as well, you can expect college loan costs to come down significantly. For instance, starting in 2014, student loan repayments will be capped at 10% of a borrower’s income. That means even if you can’t pay off that loan in five years, your son can start working on it — and it’ll be relatively affordable for him to do so.

No, there’s no general rule of thumb regarding how much school-related debt a parent should take on relative to his or her income. But frankly, you don’t need broad guidelines or even specific rules of thumb to decide what’s best here from an economic standpoint. Private school is already relatively costly, certainly compared to getting a free public education. If you had to pay twice the amount for a new private school that would no doubt crimp your budget and set your family back in numerous ways.

Think honestly about what you’ve already said: namely that you’re in debt, trying earnestly to get out of your financial bind, and that paying double what you’re accustomed to for your daughter’s schooling would be a financial hardship that would derail your efforts to become debt-free. I applaud you, of course, for wanting the best possible education for your child. As parents, we all want that. But sometimes you have to make tough choices because it’s in the entire family’s long-term best interest. It sounds like you’re grappling essentially with the decision to sacrifice an awful lot of money by sending your child to private school versus sending her to public school. Obviously, I can’t make that decision for you. But I can share with you my own story, because I’ve dealt with this very issue.

To make a long story short, I had my two older children in private school – at a time when I was in debt, as you are – at a cost of about $20,000 per year. This was when my kids were only 3 and 5 years old, mind you. Ultimately, I made the choice to take them out of that school. They transferred into a different private school that was about 1/3rd of the cost. They continued to do outstanding in school. And now, for the past couple of years, they’ve been in public school. My kids remain pretty much straight-A students and they are thriving in public school — doing far better than I’d imagined they would through these two transitions. Thank God that everything actually went very smoothly.

I say all this because so often as parents we worry about all the “what if” scenarios and think that we might be “harming” our children by “not giving them the very best.” In my case, I ultimately came to the conclusion that I had to “get real” about my finances, and that the “best” that I could offer my kids was to be honest about what our family could realistically afford. Also, by not spending so much money on private school now, our family is able to better save for my kids’ college education, which we all know will be outrageously expensive. My older two children are now 12 and 10 and again, they’re doing very well. I also have a four-year-old who will start public school in the fall.

So generally speaking, I’d recommend that you not over-extend yourself by sending your daughter to a new private school when you know that financially, you simply can’t afford it at this time. There’s no shame in that. And that decision certainly wouldn’t preclude you from letting your child do extra curricular activities, having academic tutors, etc., if you felt it was necessary. But again, the decision is best left to you and your family after you carefully consider all your options, as well as the short and long-term impact that private or public school would have on everyone involved. Good luck!

It’s great that you are thinking of your daughter’s financial future. That shows that you are a conscientious and loving mom – two traits I’m sure your child will appreciate (if not now, then certainly down the road). Why not use that gift money wisely by putting it into a college savings account to help pay for future educational expenses? Open a 529 Plan in order to reduce the amount of cash you’ll have to pay later toward tuition, room and board and other college costs. A 529 Plan is a state-sponsored college savings program. It’s a great ways to save for college because the money is put into mutual funds that grow over time. What’s more, you can get tax deductions for contributing to a 529 Plan in some states. That money your daughter gets for her birthdays and holidays will also help reduce the need to take out college loans.  Learn everything you need to know about 529 Plans at www.SavingforCollege.com.

There are lots of grant programs available in the U.S. for a host of things – from helping to pay college tuition to aiding non-profit agencies providing social services and community-based programs. You didn’t specify what types of grants you are seeking, so let me point you in the right direction of a few resources.

To learn about student loan grants and options to help pay for educational expenses or pay off student loan debt, read this post, and check out of this item and this article too. They’re about government resources to pay student loans.

For information about grants for first-time homebuyers, read this information.

If you are seeking information about grants for business owners, read this article.