Not everyone has the time or the ability to fully fund a child’s college education before they start their schooling. And even if they do have a plan for helping their kid or kids with college, it doesn’t have to be the old standby. Such a plan doesn’t necessarily have to revolve around starting to save when the child is born or be all about funding a huge 529 plan. In fact, there might be a simpler option, and one that could work better for certain situations. It involves reviewing your current debt obligations, payments, timeframes, and amounts.
Consider the Timeframe
While you might not have a full eighteen years before your child heads off to college -- or even anything close to it -- this doesn’t mean that all is lost when it comes to your college savings. Therefore, consider the timeframe you’re looking at. Will it be five years or less? Will it be longer than that, and if so how long?
What will be happening in your life -- both personal and financial -- when it comes time for your child to head a way to school? Considering not only the timeframe for your child leaving, but when it comes to many of the major events and aspects within your own life as well -- job/career, retirement planning, living situation, personal life -- can make things a little clearer and maybe opened up some college financing options you have yet to consider.
Where are Your Payments Going?When considering your timeframe for college cost planning, you may want to bear in mind some of those more major life factors for which you’re paying. There could be car payments, a home mortgage, student loan debt of your own, and other big ticket costs. Note those payments, their amounts, and the frequency of which those payments are made so that you can consider the next step.
When Will Those Payments End?Determining when the payments of big ticket costs in your life will end could provide some, if not all of the answer as to how to help your child pay for his or her education. Let’s consider the following scenario: You have five years left until your child goes away to school. He has worked summers and has saved up enough to contribute to the costs but not pay for them fully, and you don’t want him going into student loan debt to get a college education.
You on the other hand, have saved little for his education, and have a car payment of $450 a month and a mortgage of $950 a month. The car will be paid off in three years. The mortgage will be paid off in another seven. If you could put the $400 going toward the car payment into a savings account for the two years between when it’s paid off and when your child goes off to school, you’d have almost $10,000 by the time he heads off to school. Continue putting this payment amount toward your child’s education throughout the four years his education could take, and that’s another nearly $20,000. And if you have your mortgage paid off in that seven year timeframe, which would be around the time your child would be entering his third year of schooling, you could then put that amount toward the costs of college as well, which would be another $11,400 a year.
Therefore, like I said, not everything is necessarily lost when it comes to helping a child through college just because you didn’t start saving when he or she was born. Looking at alternative forms of funding and ways to transition certain costs as they end toward paying for college could provide the answer you’ve been looking for to help your child obtain an education.