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5 Ways to Pay for College on Your Terms

A parent's guide to supporting your child in college and not breaking your bank.

Every year at about this time I get questions from my clients about paying for college expenses. Your first step to finding money for college was to fill out the FAFSA form for colleges, REGARDLESS of your income. There are many useful sites to help you with that process. For more information about FAFSA forms, you should start with

There are too many parents using their retirement funds to pay for their children's education. This is the one time I ask you to put yourself before your kids, and make sure you don't bankrupt your retirement for your kids. Remember, your kids will have a lifetime of career success to pay off loans for college tuition, but you do not get a loan for retirement.

In my practice I have the advantage of hearing many rational reasons why parents are or aren't paying for their kids college education. I hear so many logical explanations, that it makes me think twice of my own plans for paying my kids tuition. I was fortunate enough to have college paid for, and feel it's my duty to do the same for my kids. However, there will be some boundaries set when it comes to payment terms. Whether you plan on paying for it all, or a part of it, here are some tips that will help make the process easier for you, your children, and your relationships with them.

1 – While in high school, give incentives to your kids for college credits.

For example, every AP class and exam passed, or a GPA maintained, offer to pay either a partial or full amount of college units. You can also give them cash. The amount you spend on an AP exam is far less than the units cost in a university. This will encourage them to do well, take more AP classes and attend college with more units done saving you money. Also the higher the GPA, the more likely they may qualify for scholarships or grants from various organizations and universities.

2 – Set boundaries and give your kids a number.

For example, I am willing to pay up to $ 25,000 a year for your college expenses, the rest is on you. If your child values the education of a certain university, she will find a way to come up with the difference to fund the remaining, OR she will find a school within your means. If we don't set boundaries, kids may not have any idea of what is affordable for you and ask for the world. As parents we don't talk about money enough with our kids, and they sometimes have no idea how deep the well of money is.

3 – Match your kids like your retirement plan does.

For every $1 you spend on your education I am willing to spend $3. Again, your kids will do the math and find a college for the value they feel is reasonable for them. If not, they will come up with other financing means to fill the gap. This will teach them about matching which will help them in the future. It also will give them some skin in the game. It's much easier to fail a class or take an unneeded class on someone else's dime, than waste their own money.

4 – Come up with a schedule of what you're willing to pay for certain schools you feel are appropriate for your child.

For example for any private university, I'm willing to pay $2 for every $2 you contribute, but if you attend a UC university, I will contribute $3/$1. (I am biased, a UCLA alum, and live in CA and think attending one of the UCs is a great education and won't break my bank!). This could also be done in-state vs. out of state to encourage a savings for you too.

5 – Set a time limit or give incentives for finishing early.

Too many kids are spending too much time in school, not taking enough units to finish on time. If you set your limit to 4 years max, the kids will find a way to stay within that limit, or pay for the extra years himself. If he is falling behind, perhaps he will take summer courses at a local community college to finish. They will pay more attention to the schools they go to, finding a campus that's actually possible to finish on time. Incentives can be used as well. For example, if you finish in 3.5 years, I'll give you $10,000 as a graduation gift. This may reward your kid for taking more summer classes to finish faster.

In all of these situations you are forcing your child to come up with an appropriate value for their college education. In my opinion, your child needs to understand the value and have ownership in it. You will build more confidence in your student this way, and he will take the education more seriously. As with some gifts, when they are given it is easy to lose sight of the value, but when you have to buy something for yourself, it's hard not to understand the price.

The last thing I want to emphasize is that you create boundaries. Set the terms you can afford. I think most parents just hope for the best, when it comes to their kids education and support it at all cost. Hope is not an investment strategy and it's not an appropriate education strategy either. Take some control back and set the terms you can live with and retire with as well.

For more articles and material on college financial planning click here. SMART Learning Library

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