There is no doubt that college tuition is becoming more expensive every year. A study conducted in 2018 shows that the cost of higher learning is so great that it causes many people to go into foreclosure. Parents want to help their children achieve greatness but, unfortunately, they simply cannot always afford it and end up losing their homes due to tuition payments. So, how can you help your child pay for college tuition without facing foreclosure because of it? The below tips will help you find the balance and keep your home.
Start Saving Early
The day your child graduates from high school is not the time to start saving for college. In fact, parents should start saving for college tuition the day the child is born. However, it is important that parents do not simply open a savings account and start funneling money into it. The cost of college tuition goes up every year and, when inflation is taken into account, even savings accounts with the best interest rates still may not match up to what your child needs by the time they are college-ready.
Instead, take advantage of special college saving plans and programs that will help you save the smart way. For example, there are some plans that act as a tax shelter for the funds you place within them. This means that you can save money at tax time, too, and perhaps put even more money into the plan.
Of course, not every parent is able to start saving for college tuition the day their child is born. Even when this is the case, it is always best to start saving as early as possible so you do not find yourself in trouble once that college tuition is due.
Many universities and colleges allow parents and students to pre-pay their tuition. This works very similarly to saving for college in a separate plan, with the exception that the money is directed right to the school. Also just like the savings plans and programs, pre-paying tuition also often comes with many tax benefits. It is also a great way for parents to lock in their child’s tuition rate before it increases because, typically, the amount that is determined when you start pre-paying is the amount that will remain in effect until you have paid the complete tuition.
Consider a Federal Loan
It is true that many parents do not want their child to take out a student loan because they do not want their child to start their adult life in debt. However, for some families, taking out a student loan to pay for college is the only choice. The good news is that some students are not required to pay back their student loans.
Federal student loans are either subsidized or unsubsidized. Subsidized loans have better terms, such as lower interest rates, for students that show a real financial need. Unsubsidized loans do not have the great terms of subsidized loans, and they often are not enough to cover the full cost of tuition. When that is the case, parents may choose additional funding sources, such as the Parent Loan for Undergraduate Students (PLUS). There are also Direct Loan funds your child may qualify for if you are denied a PLUS loan. Although going into debt is not the ideal way to send your child to college, it is better than the reality many Floridians face of losing their home.
Tap Into Your Home Equity
It may seem counterintuitive to take value out of your home to avoid going into foreclosure. However, home equity loans are often a great way to pay for your child’s education. A home equity line of credit (HELOC) is another good option that allows parents to tap into the equity of their home and pay it back as soon as they can. When a child is in school and often needs help making ends meet, a HELOC provides a convenient way to tap into their equity. Home equity loans and HELOCs also have the additional advantage of providing some tax benefits.
Many people are hesitant to withdraw from their retirement accounts to help pay for their child’s college tuition for many reasons. The first of these is because that money was already earmarked for the parents’ future. The second reason is that retirement accounts typically have a penalty attached to them if the funds are withdrawn before a person retires or reaches the age of 59. The exception to this in many plans is if the money is taken out to pay for post-secondary education. When that is the case, there is no penalty and the funds from the account can be a great relief when trying to help a child pay for tuition.
A great way to make college tuition more affordable is to take advantage of the many tax breaks available. There are breaks that allow a tax deduction for student loan interest, college tuition, and even moving expenses. It is important to speak to a tax advisor that can make you aware of the multiple tax breaks you may qualify for when helping your child pay for college.
Teach Your Child Financial Responsibility
As a parent, it is a great feeling to be able to help your child pay for their college tuition. However, it is just as important to remember that merely helping your child pay for their tuition may be more appropriate. It may not be wise to pay the entire bill on your own, particularly if it means you will lose your home to foreclosure. Now is a great time to talk to your child about financial responsibility; having your child assist with the payments is one of the best ways to put financial responsibility into action.
About to Lose Your Home? Call Our Florida Foreclosure Defense Lawyers Today
Although the 2018 study shows that many parents face foreclosure after helping their child pay for tuition, there are many other reasons people find themselves in this situation, as well. If you are about to lose your home, call our Fort Lauderdale foreclosure defense attorneys at Loan Lawyers today. Our skilled attorneys know the different ways to avoid foreclosure and can advise you of which option is right for your case. Call us today at (954) 523-HELP (4357) or contact us online to schedule a free consultation.
Loan Lawyers has helped over 5,000 South Florida homeowners and consumers with their debt problems, we have saved over 2,000 homes from foreclosure, eliminated more than $100,000,000 in mortgage principal and consumer debt, and have recovered over $10,000,000 on behalf of our clients due to bank, loan servicer, and debt collector violations. Contact us for a free consultation to see how we may be able to help you.