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
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.
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.
Adds Suh, “My dad used to tell
me knowledge is the one thing a
thief can’t take away.” DI