Between inflation, student competitiveness and school selectivity, college costs are rising - fast. Your best bet is to start saving now so that you have some money put away for your children when they're ready to start college. "In 18 years, these numbers could be $175,000 for a public school and $375,000 for a private school [for four years]," says AuWerter.
For starters, try a 529 college savings plan. "The account grows tax deferred and withdrawals taken for college costs are tax free," says AuWerter. Picking the right plan, however, can be a little tricky. AuWerter suggests looking at your home state's plan first, but if the investments aren't great or the fees are too high, look elsewhere. For a breakdown, click here to visit SmartMoney.com's article on the best and worst 529 plans.
Also, don't forget financial aid. "A lot of parents get bogged down with this idea of the more they save, the less financial aid they're going to receive," says AuWerter. "But, most financial aid is loans these days." Put as much money away as you can, but don't neglect your retirement fund because of it. "There's this saying in personal finance... there are loans for college, but there are no loans for retirement," says AuWerter. Do your best to put money away for both, but if you're financially strapped, save for retirement instead.
When you go to look for loans for college, try to avoid private loans. "There's a lot of turmoil right now in the college loan industry - the credit crunch has hit it," says AuWerter. "Private loans are going to have higher interest rates right now than federal loans." Try to apply for loans as early as possible. Many college lenders aren't offering as many types of loans as they used to, and some are going out of business altogether. Be sure to contact your school's financial aid office to get more information on helping to pay for college.
Don't count out scholarships, though. Apply for any that you're eligable for - you never know what you might be awarded. You don't have to be a star athlete or a straight A student either. "There's scholarships out there for all types of kids," says AuWerter. Do some research and find which ones apply to you. By visiting www.FastWeb.com, you can find many different types of scholarships.
For more information on financial aid, we well as additional personal financial advice, click here to visit www.SmartMoney.com
By Erin Petrun