Information for Parents of Students Planning for College

Financial Preparation

Saving Money

Saving money is the primary way to prepare for the costs of college. Setting aside a certain amount every month or each payday will help build up a fund for college. If you and your child begin saving early, the amount you have to set aside each month will be smaller.

You will also want to think about what kind of savings approach to use or what kind of investment to make. By putting your money in some kind of savings or investment, you can set aside small amounts of money regularly and the money will earn interest or dividends.

Don't forget that you won't necessarily have to save for the entire cost of college. You can also pay part of the costs from your earnings while your child is attending school.

You should begin saving as early as possible. The average in-state tuition and fees for full-time undergraduate students for 2000-01, before student financial aid was deducted, was $1,360 for a public two-year college and $3,980 for a four-year public university. Private four-year schools averaged $15,530 in 2000-01.

(Source: National Center for Education Statistics, Higher Education General Information Survey.)

Many state governments now offer innovative college savings programs. The College Savings Plans Network (an affiliate of the National Association of State Treasurers) provides information about these plans and links from their Web site to the many state plans.

FinAid, an online financial aid resource, has a number of online savings calculators to help plan your savings and project your financial returns. They also can help you project college costs and student loan payments.

Tax Benefits and Prepaid Tuition Plans

For more information on ways to help finance your child’s education, including an education IRA, go to


Another funding option is the Federal PLUS Loan program. Go to to visit the funding section, where the Plus Loans are described as well as other federal loans, grants, and work-study.

Other borrowing options involve leveraging personal investments or your home’s equity.

More and more students and parents are using private loans or credit cards to finance postsecondary education. Because these types of consumer debt usually carry far higher interest rates than federal student loans, you should consider them a last resort.