DiversityInc - July/August 2006

ed, is accumulating debt by way of student loans, home-equity loans or borrowing from retirement plans.

“If you’ve got a youngster in their last semester of college and there are no funds available, then a small, short-term debt intended to be paid off as soon as possible may be the only way to go,” she says. But “starting life as a student going into the working world with a lot of debt is a really bad idea.”

Both Maloney and James Suh, regional sales manager, Wells Fargo Private Client Services, are less enthusiastic about UGMA (Uniform Gift to Minors Act) or UTMA (Uniform Transfers to Minors Act) accounts. They are created in the child’s name with the

parent acting as the guardian—until the child reaches the age of maturity, which is set by state law and ranges from 18 to 21. Then, the child controls the money.

“Some 18- or 21-year-olds are not ready for that responsibility,” Suh says. Maloney agrees, mentioning one student she knows who blew his entire savings on gambling boats in one night.

Especially when advising middle-or lower-class families, Suh advises that people “save as much as you can without it causing stress. I always tell clients to have a balance.”

If parents can’t afford to set aside much money, don’t stress. There are options available.

In addition to various federal

HOW TO PAY FOR COLLEGE

Financial experts agree that college never is out of reach if parents and students start saving early enough and students remain realistic about their options. Here are their tips:

● State-sponsored 529 college-savings plans, the best option, puts parents in control of the money. Tax-deferred and tax-exempt when used to pay for qualified higher-education expenses.

● Education savings accounts (formerly called education IRAs) are similar to 529 accounts but the maximum annual contribution is $2,000, compared with $11,000 for a 529.

● UGMA and UTMA accounts give students control of the accumulated savings once they’ve reached the age of maturity (from 18 to 21, depending on the state).

● Federal Stafford loans provide up to $18,500 a year and Perkins loans up to $4,000 for undergraduate students and $6,000 for graduate students.

● Pell grants, which do not have to be repaid, range from $400 to $4,050.

● Start investigating scholarship options early by obtaining a copy of your high school’s awards listings.

● Accumulate debt through student loans only when out of other options.

Source: www.savingforcollege.com

Financial Literacy

student-aid possibilities (see chart), students can take advantage of work-study programs. Ambitious undergraduates sometimes can accelerate their college experience by completing a degree in three years instead of the typical four.

Scholarships remain an overlooked option for many. Maloney recommends that parents get a copy of the list of their local high school’s scholarship winners, which typically is handed out at graduation ceremonies. “Get a hold of that a couple of years before your youngster is going to be a senior and identify which might be possible,” she says.

Maloney also guides parents to programs such as Dollars for Scholars, a network of more than 1,200 grassroots community-based, volunteer-driven scholarship foundations located throughout the United States. Last year, Dollars for Scholars chapters awarded about $29 million in scholarships to more than 35,000 students.

“With enough lead time, you can groom yourself to be acceptable for an award. And don’t stop at one,” she says.

Often, a combination of savings, scholarships, grants and loans is required, especially if a child wants to attend a private university.

Whether parents start saving during pregnancy or when those college applications arrive, there’s always a way to make higher education a reality. And as other companies continue improving the education of their workers, education becomes an increasingly important investment for U.S. parents, Maloney says.