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Exploring Ways to Fund Your College Education

If you’re not able to save enough to cover the full cost of your (or your child's) secondary education, various scholarships, grants, and loan programs are available to cover shortfalls. Here are some resources worth exploring:

  • Rediscovering U.S. Savings Bonds: Whether you’re able to save only relatively small amounts, you’re uncertain about your potential student’s future plans, or you love the safety and security found only in U.S. Savings Bonds, you may find that this is an attractive way to save for future college expenses and still take advantage of some tax exemptions on the interest earned on your bonds.

  • Saving for college the old-fashioned way: It may seem strange to even think this, but the trade-off for taking advantage of the income tax breaks available through Section 529 plans and Coverdell ESAs is that you’re guaranteeing that you will use that money to pay for qualified educational expenses. If only all of life were so certain and so sure.

    When you save in traditional investment and savings accounts, you’re not tied to using your savings in any one way. Of course, in exchange for that freedom to spend your savings as you will, you lose any opportunity to defer or exempt tax on your earnings.

  • Putting your faith in a trust fund: For most people, the phrase “trust fund” brings to mind visions of great wealth and privilege; in other words, it has nothing to do with you. And that picture couldn’t be further from the truth. If you save money in any form, then you’re a potential candidate to create and fund a trust.

  • Saving in your retirement accounts: Using retirement funds to pay for college probably isn’t the best way to put money away for college. In certain circumstances, such as when parents are older or you face completely unplanned educational expenses, it may make some sense to access funds from a retirement account to pay qualified educational expenses.

  • Accessing your home equity: If you (or you and the bank) own your own home, you may be sitting on a larger nest egg than you ever considered. Your equity may be available to fund educational expenses.

  • Identifying sources of free money: Not every potential student is an academic genius or a future first-round NFL draft pick, but you don’t necessarily need to conclude that your child won’t qualify for scholarships and grants.

  • Borrowing to fill in the gaps: As college costs have soared, many parents and students rely on loans offered by the U.S. government or by private institutions with federal guarantees.

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