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Home > Consumer Focus Archive > College 101 for Parents
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Dollars and Sense for Sending Your Child to College
 Do you have a child about to embark on the exciting adventure of college life? As many parents learn during this transitional time, there are a lot of decisions that extend beyond the classroom and selecting a major. Here are some tips to help you make smart decisions that work for both you and your college student.
Posted: August 1, 2008 |
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Financial aid
 With ever increasing college costs, you will probably need to investigate multiple ways to fund your child’s education. Before setting foot on campus, you and your child should research financial aid resources for attending college, both federally and in your state. This can include grants or scholarships, neither of which have to be repaid, or loans that must be repaid to the lender. Make sure that your child has completed and submitted their FAFSA, so that he/she can be eligible for as much financial assistance as possible. Once your child heads to campus, it may be useful to have two copies of important financial documents: one to keep at home and one to send with your child.
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Money Management and Credit Cards
 Is college the first time that your child will be responsible for financial decisions? Give them practice before they leave home; encourage them to track their actual spending over a 2 to 4 week period. This information can, in turn, be used to create a budget sheet to serve as their financial roadmap. This is just the first step, though. After they’ve created a budget based on their spending, really encourage them to live according to this plan.
Getting a credit card for your college bound child is a decision that will impact their financial health for years to come. Before they sign on the dotted line, do some homework with your child so that you understand and agree on the rights, responsibilities and serious consequences of credit use. If you decide to help your child get a credit card, here are some helpful tips:
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Changing Insurance Needs
 As your child departs for college, the various insurance plans that you have set up for him/her may need to be tweaked to fit new circumstances.
- Health Insurance - Many companies will allow you to keep your children on your policy as long as they are enrolled in school full time. However it may be more beneficial to get your child a separate policy in their college town if your HMO or PPO fails to cover expenses outside your immediate area. Additionally, many colleges offer comprehensive health insurance plans for their students that they can enroll in when they register for classes. Take time to discuss the basics of health insurance coverage with your child and ensure that he/she has a current insurance card to take to school.
- Auto Insurance - Depending on whether or not you intend to send your child to college with a car, you may be able to reduce your coverage (and resulting premiums) by removing your child from the policy. Even changing their coverage to an “occasional” driver who only drives when back home can yield tremendous savings. If your children plan to take their car to school, they would generally be covered by your auto policy, as long as the car and the insurance policy are in your name and they maintain your address as their permanent residence. You should let your insurance company know that the car will be garaged in another location and there may be a change in your premiums based on the accident and theft statistics in the new location. And please, remind your child to send good report cards home, since stellar grades can provide premium savings for you.
- Property Insurance - Consider insuring all of the electronics and personal property that your child will take to school. One option is to add them to your homeowners’ policy, especially if your child is living in the dorm. However, if the value of their property is significant (more than 10% of the value of your own policy) it may be in your best interest to get a separate policy for your child. If you decide to purchase renters’ insurance, be sure to understand the different types of policies available.
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Taxes
 If you were able to save money for your children’s education through a 529 savings plan or a Coverdell IRA you may benefit from the ability to withdraw earnings from the investments without the funds being taxed. Rules for college savings plans may vary by state, so be sure to check with your state before filing your federal and state taxes.
In addition to these tax-free saving vehicles, you may be eligible to take either the Hope Scholarship Credit or the Lifetime Learning Tax Credit, depending on how long your child has been enrolled in college. These credits are subject to gradual reduction, based on your modified adjusted gross income.
When tax time comes, make sure that you and your child are clear on whether they are listed as a dependent on your tax returns. Their dependent status determines whether you can claim certain credits and deductions on your taxes. For example, if you want to deduct the interest for a PLUS student loan that you took out for your child’s education, it is required that your child has to have been your dependent when you took out the loan. You can continue to deduct interest paid on the loan over the entire repayment period, even after your child has graduated and is no longer considered your dependent.
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