One of the most expensive undertakings by most parents in their lifetime is educating their children until they complete their college education. With the rate at which the cost of living is rising being higher than the rate at which household income levels are growing; most parents find themselves struggling to raise enough funds to pay for their children’s college education. To help the parents meet the financial obligation of educating their children through college, there are several alternative sources of funding that you can choose from.
- Exhaust your federal options
Before thinking of getting private loans to fund your children’s college education, you should first consider going for federal options and exhausting all of the available opportunities there. Federal loans for college education are usually cheaper as compared to the private loans and they usually have flexible repayment structures and longer credit periods. These characteristics therefore make them the first point of call for students with financial needs. It is however shocking to realize that most parents do not encourage their children to apply for these federal loans due to lack of knowledge on the processes involved and the eligibility criteria.
“Some families might believe, ‘We’re upper middle class; our income is upper level so we wouldn’t qualify,’” notes Kevin Walker, cofounder and CEO of SimpleTuition.com. “Whether you’re Bill Gates’s kid or a child of a family with zero income, you can get a federal Stafford loan.” Parents and students are therefore encouraged to review the FAFSA guide in order to familiarize themselves with the processes involved in applying for the federal loans for college students.
- Apply for college specific scholarships
Some colleges offer scholarships to high performing students to undertake their undergraduate studies within their institutions of higher learning. Other scholarships are offered not based on academic performance but rather based on the student’s excellence in sports, arts or music. Identifying and applying for the suitable scholarships that are being offered in the institution of higher learning where you want to take your child will help in expanding your alternative sources of funding for their college education. An important thing to note is that the scholarships can be either partial or full. When they are partial, the scholarships tend to cover the tuition fees and the parent is left to take care of the accommodation & other living costs for the student while they are in college. Full scholarships usually cover everything including the tuition fees and the accommodation costs for the whole studying period.
- Apply for sponsorships from foundations, NGOs, governments & corporates
From time to time, corporates, non-governmental organizations, foundations and some state governments offer sponsorships to students to pursue their college education in specific colleges or in any college within specific states. This is also a good source of funding for needy students who might not be able to afford the college fees charged by their colleges of choice within certain states. In most cases, the sponsorships are usually aligned with the academic skills required by the sponsoring corporate, NGO, foundation or the government.
- Tap home equity
After exhausting the free sources of funding for your children’s college education, you can then start exploring other private sources of funding, including tapping into your home equity. By taking out a home-equity line of credit, you are able to borrow money as and when you need it; which might be a little bit cheaper as compared to a normal equity loan. This is due to the fact that under the normal equity loan you will need to borrow the whole amount at once and pay the interest on it upfront. With the home-equity line of credit, you can phase out your borrowing over the years when your children are in college and repay the loans as and when they are taken in the different phases.
Every child is entitled to quality education and finding the right source of funding to educate your child can be a daunting task. However, with the above 4 different sources of funding for college education, you should be able to get one or a combination of a few of them to help you afford college education for your children.