Four Ways To Save Big On College

A Few Moves Can Save Families Thousands Of Dollars

(CBS/AP) 
2. Try Low-Cost Schools

Wendy Whiton of Bethlehem, N.H., has a high school-age son with a dream to attend the University of New Hampshire (UNH) in Durham. But at $16,810 per year, the family of six can't afford to send him there for four years.

Solution: He plans to spend his first two years commuting to a technical college in Concord, N.H., then will transfer to UNH. "When you transfer, your [future] employer will see the college you graduated from, so it doesn't really matter where you did your first two years," Mrs. Whiton says. Her son, she adds, "is a pretty practical kid."

This kind of approach works well when students thoroughly research course requirements well in advance, says Ann Coles, senior vice president of college access at The Education Resources Institute, a nonprofit organization based in Boston. They should ask, for instance, about a school's relationships with community colleges and its expectations for those who wish to transfer credits.

"Lots of students attend more than one college these days," she says. "If they could think strategically about this, they could do it to significantly reduce their costs."


3. More Tests Mean Smaller Bills

Less time on campus means fewer tuition bills since colleges usually charge according to the number of courses taken. Advanced placement (AP) tests provide a way to cut back on the hours — and the dollars — spent pursuing a college degree.

Consider the path taken by Meghan Price of Gainesville, Ga. Because she scored well on the six AP subject exams she took in high school, she was able to enroll this past fall as a sophomore for her first year at the University of Massachusetts in Boston. By spending three years on campus instead of four, she expects to save between $32,000 and $34,000.

"I wanted to place out of core courses and get on to more interesting work," Meghan says. "But it's always nice to save a little bit of money."

Many students have caught on to the idea: 2.1 million students took AP exams in 2005, up from 786,000 in 1995. What's more, students with proficiency in one of 35 subjects can cut their collegiate hours just by showing what they know in a College Level Examination Program (CLEP) test. This, too, is growing in popularity: 140,000 nonmilitary students took CLEP tests in 2005, up 32 percent from 106,000 in 1995.

By passing a CLEP test, students don't have to "enroll in a [core curriculum] class they don't need," says CLEP Director Ariel Foster. "Especially if you're taking out a loan, it's a long-term financial commitment ... that you can apply toward a course you really need."


4. Shop Around To Save

As a Colorado resident, Allan Roth qualifies for tax deductions if he contributes to his own state's 529 program, a tax shelter for college savings. But for the past five years, he's been steering the lion's share of his college nest egg into Utah's 529 program. The reason: Utah's low plan management fees enable him to save more, even though he doesn't get a state tax deduction.

Unlike some states, Utah doesn't hire pricey investment firms but invests directly in low-cost Vanguard mutual funds. "We're operating this to help families save for college, not to make a profit," says Lynne Ward, director of the Utah Educational Savings Plan.

Despite efforts to save, Americans borrowed $13.8 billion from nonfederal sources to pay for college last year, up from $1.7 billion in 1995-96, according to last year's College Board report on student aid. Grants and loans each make up 46 percent of student aid funding, while the remainder comes from tax credits and work-study programs. Grants made up 50 percent of student aid funding in 2001-02.

When seeking out a loan, students should compare not just interest rates, but also payback benefits, such as rates that drop with a certain number of on-time payments, says Sheryle Proper, director of financial aid at Allegheny College and coauthor of "The Everything Paying for College Book."

"It's more than just taking the first loan that's available," Proper says. "There's a little bit of work involved in shopping around and comparing."