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College Can-Do - Strategies to help you cover the cost, whether you’re starting out, catching up or signing tuition checks now.

by Heidi Pearson | Illustrations by Jon C. Lund

It’s easy to understand why paying for college can feel like an Olympic event. Saving in advance takes dedication. Paying as you go means sacrifice. And following through until the last payment clears can be downright exhausting. Toss in the fact that college tuition and fees are outpacing inflation—a trend that many experts agree will continue—and you may be sweating it out with the best of this summer’s Olympians.

But take heart. “You can do it,” says Thrivent Financial representative Jack Claypotch of Limerick, Pennsylvania. To help, we’ve paired common funding challenges with possible financial strategies.

Challenge: New parents saving for college and their future.
Meet Maggie and Mike Milemarker, the tireless relay team. They can barely imagine their son’s first words much less his first day at college. But by saving early for themselves and for their son, they hope to come out ahead in the long run. Their goal? Save enough to pay for half of their son’s estimated college costs in 18 years.

Game Plan:
Save for ‘us.’
The Milemarkers and others like them should think about their own financial needs first. “New parents are eager to save for their child’s education, sometimes at the expense of retirement savings, life insurance and disability income insurance—important safeguards against illness and injury,” Claypotch warns. “Make sure you have all of your bases covered.”

Invest month by month.
Anyone who begins funding a child’s education early is off to a brilliant start, since investing just $100 a month for 18 years will yield $48,000, assuming an 8 percent average annual return on a diversified portfolio. If the child or other relatives help out, the pot of savings could be even larger. Figure out how much you can put away each month. Then increase that amount as you receive raises or other income increases.

Consider a Coverdell or 529.
With a Coverdell Education Savings Account, parents make a yearly non-deductible contribution (up to $2,000 per year, per student) and the account grows on a tax-deferred basis. Plus, distributions for qualified education expenses are tax- and penalty-free. But note: The benefits of using this plan may vary depending on parents’ income level.

A 529 plan lets accumulated money grow tax-deferred of federal and potentially state income taxes. It also offers a high maximum contribution limit (sometimes as much as $250,000). Better yet, the beneficiary can be changed to another family member at any time, and money in the plan can be used to pay for books, supplies, tuition, fees and more.

Look at life insurance.
“A new baby entering the picture goes hand-in-hand with life insurance discussions,” says Thrivent Financial representative Alison LeCloux of Ann Arbor, Michigan. Should something happen to the Milemarkers, a life insurance contract would protect savings for their son. Some contracts also would allow them to tap cash values to pay for education costs once he’s in college.

Challenge: A student paying for college on her own.
Meet Francine Freestyler, the record-breaking swimmer. A stellar student entering ninth grade, Freestyler knows it will be up to her to pay future tuition bills. Though she’s saved some birthday and babysitting money over the years, she’s counting on financial aid to help her go the distance. Her goal? Save as much as she can, as fast as she can.

Game Plan:
Prioritize.
Freestyler may need to skip that 11th-grade band trip to New York and put a “holding plan” in place to curb her spending. The basic idea: Make yourself wait before buying something you “have to have,” like a pair of shoes or a new cell phone. This can help you put a stop to emotional or impulse buying.

Get a job.
“Two nights a week working in a pizza place can be beneficial,” LeCloux says, not only for the income, but also for the time-management skills. Of course, the job shouldn’t interfere with study time and extracurricular activities, both of which can lead to merit scholarship and grant opportunities for students like Freestyler.

Talk aid and scholarships early.
With college a few years out, it makes sense for students and their families to discuss financial aid rules and options with an expert. Parents may not know, for example, that their income is factored into financial aid awards even if a child is paying tuition and fees. (See “Financial Aid FAQs” below.)

College fairs are a good place to get financial aid details, as are admissions information sessions. Or, make an appointment with the financial aid office at a nearby college—it’s OK if you’re not committed to attending that particular school. For scholarship information, try your high school guidance counselor, the local library or the Web.

Look ahead.
Your financial representative can explain how money decisions in the years leading up to college can impact future financial aid awards. Families like Freestyler’s might schedule this meeting even before high school to get a handle on college costs and set financial goals together.

Think positive.
Freestyler and other students paying their own way should remember that it’s possible. “Don’t panic,” Claypotch says. “Just get started.”

Challenge: Older parents balancing their family’s competing financial needs.
Meet Anders and Annette Agility, the ever-flexible gymnasts. Baby boomers, the Agilitys are offsetting college tuition for two kids and nursing home care for Annette’s mother. The combination is draining their savings and threatening their plans for a secure retirement. Their goal? Take care of their loved ones while still looking out for themselves.

Game Plan:
Protect retirement savings.
“Saving for retirement should always be your top priority,” LeCloux says. Make tapping retirement savings a last resort, since the penalties for doing so are severe. And know this: parents’ 401(k) and IRA savings won’t count against students applying for federal financial aid.

Enlist expert help.
“There are so many juggling priorities for people in this predicament,” Claypotch says. It can help to talk to a financial representative—who doesn’t face the same emotional pressures the family does—for an objective look at the overall financial picture and possible solutions. The Agilitys also should make a fresh call to their children’s college financial aid officers to talk about scholarships and work-study programs.

Consider long-term care insurance.
Those feeling sandwiched between the needs of two generations might check into long-term care insurance options, not only for older loved ones but also for themselves. That could help people like the Agilitys avoid “sandwiching” their own children down the road.

Get creative, but stay smart.
“While a Roth IRA is almost always used for funding retirement,” LeCloux says, “an alternate use for that money can be college funding.” But, she cautions, the pros and cons of unconventional college-funding decisions have to be carefully thought through.

Twin Cities writer Heidi Pearson and her husband established 529 plans for each of their three sons (ages 6, 3 and 1) when they were born. Pearson is a frequent contributor to Thrivent magazine.

Need More Info?
Your Thrivent Financial representative is there to help you with any of your financial planning decisions, from insurance and investments to retirement planning and college funding. Find your representative’s name and contact information online or call 800-847-4836.

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