If you have kids in college, the Fall tuition bill is on its way to your mailbox in June-July.  If you have a first time starting Freshman, this is your first REAL experience with paying for college.  If your kids are younger, now is the perfect time to get serious with college planning how you and/or your kids will pay college expenses.

Although all families are different, here are a few ways families prepare:

Start or add to your 529 plan – A 529 College Savings Plan can be started even before your child is born. Here in Pennsylvania there is tax deduction for contributions. In a 529 earnings are tax free.  Grandparents can also contribute either along with the parents or into an account the grandparents own. They control and own the funds should circumstances change.

Understand what college loans are available – About 30 percent of students take federal student loans, according to Sallie Mae, while 7 percent take out private loans.  There are also Parent loans that are owed by the parents rather than the student. Some loans have limits, such as the Federal Stafford Loan.  Some have very low interest such as the Subsidized Stafford Loan available to lower income families. Understanding all the loan options available, which ones you qualify for, and their payback terms can be daunting for parents and students alike. Get help in determining which types are best for your family.

Scholarships and Grants – Some higher-priced colleges give scholarships to students, effectively tuition reduction, and can be non-needs based.  There are scholarships you can start applying for starting senior year in college.  There are even websites that help you determine which scholarships you

Work Study, summer jobs – If you are a business owner hire your kids.  Not only will their tax bracket be lower than yours, but the money can be put into their account as part of your college planning. The National Center for Education Statistics (NCES), which is run by the U.S. Department of Education, found that students working 15 hours weekly have a significantly higher GPA than students working 16 or more hours and students who don’t work at all. Almost all schools offer work study programs with work on or near campus.

Plan for the payment – Some people plan that major mortgages or other loans will be paid before the time college starts.  This methods lets you continue a payment that has already been maintained by your cash flow. For example, some clients have rental properties that will go toward college expenses as soon as their mortgages are paid.

College payment plans – Most colleges allow monthly payment plans.   Paying monthly can be a way of spreading the payments so they fit better into your income and expense plans rather than all at once.

Other family savings – Some families have sufficient savings accounts outside of retirement and college accounts to pay for much of college.

Roth as a last resort – The contributions portion (but not earnings) of your Roth Account can be used tax free, but only if you’ve had the Roth for at least 5 years. Be careful of shorting your retirement needs.  Remember there are loans for college but no loans for retirement.

No matter your family circumstances, your best college payment options come from having a college payment plan. Whether the parent or the kids are paying for school, having a plan is best. I use a ‘Layered Cake’ methodology for helping college-bound families get ready for those dauntingly large college bills.

Merra Lee Moffitt, CERTIFIED FINANCIAL PLANNER™ Professional (CFP®), is a Senior Partner at Good Life Financial Group, Wyomissing. She loves helping families grow their financial independence via sound financial planning. She helps her clients keep work/family balance while they pursue financial success.  It’s part of her financial planning process. A recognized source on Pennsylvania business and financial ssues call, click or contact Merra Lee at 610-628-2055, MerraLee.net and merralee.moffitt@lpl.com.