Cost of Education

Start planning and saving for college expenses as early as possible. How early? Preferably before your child can even walk or talk. A good option is arranging an automatic transfer of money from your financial institution account or paycheck into a college savings fund. Online calculators (opens new window) can help you estimate how much you might need to save for college.

The following college savings options may have tax benefits depending on your income and other factors, be sure to consult a tax advisor for guidance:

• 529 plans (opens new window), consisting of both pre-paid tuition and college savings programs, are operated by state or educational institutions. Every state offers at least one of these types of plans, or is developing one. Some states offer both, and many of these plans are open to non-residents.
• Traditional savings or investment accounts;
• U.S. Savings Bonds; (opens new window)
• Traditional and Roth Individual Retirement Accounts (opens new window) (IRAs);
• Coverdell Education Savings (opens new window) (also known as Education IRAs);
• Accounts created under the Uniform Gifts to Minors Act (UGMA) or the Uniform Transfer to Minors Act (UTMA).

Save and invest for purposes other than education. Choices may include investing in credit union share certificates, which are insured by the National Credit Union Administration, and various products that are not NCUA-insured against loss, such as stock and bond mutual funds.

If you must take out a loan for the benefit of a child, be careful. For example, before you (or your child) take out a loan for education purposes — including borrowing from a retirement plan — make full use of all free student aid (opens new window) (scholarships or grants). Doing so will make it easier to repay the loan, lower the amount of interest paid, and avoid the stress of having a large student loan debt that can limit choices and opportunities in life.

Have adequate life and disability insurance. These can avoid financial ruin for your family and provide an extra cushion of support for higher education payments if something bad were to happen to you.

Financial aid is money to help pay for college or career school. Aid can come from the U.S. federal government, the state where you live, the college you attend, or a nonprofit or private organization. Learn more about the federal student aid programs as well as other sources of financial aid to help you pay for college or career school. Also, learn about the process for applying for and receiving financial aid. Information is provided by the Office of Federal Student Aid (opens new window) at the U.S. Department of Education.

This tool (opens new window) from the Consumer Financial Protection Bureau allows you to input some information about the schools you’re considering to see the financial impact down the road. If you don’t have a financial aid offer, we’ll show you where to find cost info for each school.

If you're considering student loans to help you pay for school, you're not alone - many students need loans to cover their full cost of attendance. In 2010, 67% of bachelor's degree recipients used loans to pay for their education. But the more money you borrow now, the higher your monthly loan payments will be after you graduate. Use this tool (opens new window) from the Consumer Financial Protection Bureau to help you find the student loan best suited for your needs.

You've decided that college or graduate school is your ticket to a better career or the path to advancement in your current job. Or, maybe you just want to take a few classes to upgrade your skills. Either way, returning to school as an adult has its challenges.

Where will you find the money?

Returning to school often involves financial sacrifices, but there are ways to lessen the bite. Personal savings, financial aid (opens new window), private loans, and employer-funded tuition may be available to you, and education tax credits and deductions can help you out at tax time.

The first thing to do is calculate how much your education will cost. Make sure to add in collateral expenses that won't show up on the college bill (e.g., day-care and commuting expenses). And if you're giving up your job, factor in the time you'll be without a paycheck, and the time it might take you to find a job in your new profession. Then, if you can't afford to pay your education expenses out-of-pocket, go look for the money.

Ask your employer

Unless you're leaving your job to attend school, ask your employer about tuition reimbursement. There may be strings attached, though (e.g., you may need to certify that you're not retraining for a new career, or you may have to promise to work at the company for a number of years after you graduate). The good news is that up to $5,250 of employer-provided educational assistance is tax free, even if it's for classes that are unrelated to your current position. For more information, see IRS Publication 508, Tax Benefits for Work-Related Education.

Use personal assets

Do you have savings that could cover a portion of your expenses? Or, maybe you could sell some assets. Just remember that tapping your retirement funds should be a last resort - money you withdraw will reduce your nest egg and miss out on the potential for tax-deferred growth. And, depending on the type of retirement account you tap, you may also face tax consequences and penalties for withdrawing money before age 59½.

Investigate education tax credits and deductions

In addition to the tax break noted above for employer-provided educational assistance, there are several other tax incentives that can help ease the financial burden of returning to school. For assistance or more information, consult a tax professional or the IRS (opens new window).

Finally, how will you balance school, career, and life?

You've found the money - now you need to find the time. Balancing school demands with the rest of your adult responsibilities will be challenging, though not impossible. Here are some tips:

• Map out your life goals (again) to confirm that returning to school will help you achieve them.
• Establish a family/friend support network before classes start, and make sure your family supports your decision to return to school.
• If you have older children, explain your new routine and how they can help out. If you have younger children, arrange day care if necessary--check to see if your school offers it.
• Look for programs designed for adult students (e.g., support groups, tutoring programs, specially trained academic advisors and counselors).
• Consider going to school part-time, taking night classes, or signing up for online classes. Each option can save you time and money.

Always keep in mind the financial and personal rewards that will come after your education is complete.

The Consumer Financial Protection Bureau’s Paying for College (opens new window) tool will help you compare college costs and financial aid offers.

Add some information about the schools you’re considering to see the financial impact down the road. If you don’t have a financial aid offer, the Paying for College tool will show you where to find cost info for each school. You can compare up to 3 schools.

There are many types of scholarships (opens new window) and many different organizations that provide them. Each scholarship provider has its own application and its own rules to decide who can get its scholarship. Your job is to find scholarships for which you think you might qualify and to apply by the deadlines.

Both the federal government (opens new window) and nonprofit organizations offer money for college to veterans, future military personnel, active duty personnel or those related to veterans or active duty personnel.

Understanding how to repay your federal student loans (opens new window) can save you a lot of time and money. We’re here to help you manage repayment and answer any questions you have along the way. Let the office of Federal Student Aid at the U.S. Department of Education help walk you through the process.

Need more help? This tool (opens new window) from the Consumer Financial Protection Bureau provides information and advice for optimizing how you pay off your student loans based on some basic information about your situation.