It’s never too late to start saving for college, even if your child is already in middle school. Whatever can be squirreled away today will offset rising college costs and financial aid loans tomorrow. Even parents who don’t have much money to spare can start a fund.
Many states allow you to buy a few semesters or even a few years’ worth of college tuition at today’s locked-in rates under plans, such as with the Michigan Education Trust. Or you can open an account, such as the Michigan Education Savings Program, for as little as $25 to cover tuition and other expenses.
If you’re starting late, the key is to keep saving, even if you can’t save enough to cover all college costs by the time your child graduates. At the very least, every penny saved now will reduce loan payments down the line and lessen the amount of financial aid for school that is needed.
Savings Help Reduce Need for Financial Aid Loans
Terry Gallagher of Ann Arbor said he knows he will not have enough in his two children’s MESP accounts to cover all of their college costs. His daughter, Mary, is in sixth grade and his son just entered high school. Mary’s college account was opened shortly after her birth. By the time she graduates, it will be at about $20,000. The family income is already stretched because his wife just went back to college.
“It’s not enough. [But] it’s not the only option,” Gallagher said. “The MESP is just to give us a little more cushion.”
Gallagher said the college fund money is drawn directly from his bank account every month. He likes it because it makes the payments invisible and painless. Another advantage is that other family members have been able to contribute to the fund. The children can also drop a few dollars into their accounts.
Financial Aid for Students is Common
There are always options to offset small savings. More than two in three students receive financial aid in college. Loans are a typical route for middle income families.
“A financial planner reminded us that you can always borrow for college,” Gallagher said. “People are not afraid to borrow money for a car. College is something you only pay for once, usually.”
As children get older, some costs such as day care disappear; that money can be put into a college plan, Gallagher suggested. “The more you can save, however you do it, the better,” he said.
Chastity Pratt has two young children and covers education for the Detroit Free Press.