After years of planning and dreaming, most families will stop at nothing to pay for a college education — even sky-high interest payments and the risk of living in debt for years to come.
While it's no secret that credit cards should be a last resort for spending of any sort, statistics show a rising number of families opting to put college tuition and related expenses on plastic.
Aside from coming up with creative methods for financing a college education, a grim economy calls for creativity before the bills start rolling in.
College-bound students, by junior year of high school, should start planning to pay for higher education before the time comes to foot the bill.
At least a year (or more!) before graduation, start talking to high school counselors and searching websites for grant and scholarship information. Most are based on family income, but some eligibility requirements are based on grades or talents.
Keeping expenses realistic will set more attainable savings goals. Make realistic choices when looking at schools and carefully compare curriculum and tuition costs, which can vary drastically.
Based on statistics from a recent Sallie Mae survey, 40 percent of families failed to factor cost into the decision about which school their undergraduate should attend. By comparison, tuition at a private, four-year college averaged some $24,000 per year while community college could cost closer to $10,000, according to the College Board, a nonprofit organization responsible for administration of the SAT.
Tuition rates aside, consider ways to cut additional expenses. Living at home and attending community college first, for example, can cut costs considerably from heading off to a four-year university after high school graduation.
According to a poll by Sallie Mae, the nation's biggest student loan company, a sampling of 1,400 undergraduates and their parents this year found one in five parents planning to either take out second mortgages of more than $10,000 or charging some portion of college expenses to a credit card.
While credit cards are easy to use — credit card companies even prey on unsuspecting college students with campus promotions and freebies for new customers — experts say there are far more sensible ways to pay for college.
"Point blank, students should not use credit cards to finance their education," says Greg Jones of Consumer Credit Counseling Service in Medford.
"First, if they do use credit cards, there is going to be a monthly payment and if things get difficult and they are unable to make a payment they will then be assessed a late fee and the interest rate will shoot up."
Rather than ruining credit scores or racking up monthly bills for post-college life, careful planning and advice from a qualified financial advisor can produce a list of options for paying for college without putting unnecessary financial burden on students or their families, says financial advisor Ed Lindbloom of the Central Point Edward Jones office.
Perhaps most ideal, especially for families saving in advance of sending kids to college, the Oregon 529 College Savings Network account allows up to $4,000 in tax-free contributions annually and funds can be used for everything from tuition and books to room and board.
A possible downfall, most colleges will treat money in a 529 account as parental assets, which could potentially reduce financial aid eligibility for families seeking grants and scholarships.
Next up, low interest federal Stafford Loans are the most common source of college loan funds, featuring reasonable interest rates and no repayment of interest necessary while students are enrolled in school. A downfall, eligibility requirements are fairly strict and students will have loan payments soon after entering the workforce.
PLUS Loans, or Parent Loans for Undergraduate Students, are government backed and allow parents to borrow up to the amount of college costs, minus any financial aid that the student received, with a fixed rate of 8.5 percent, far lower than most traditional private student loans.
A final alternative, borrowing against existing investments is more financially savvy than using a Visa or MasterCard, says Raymond James Financial Services advisor Liz Murphy, but should be done carefully and with advice from a certified financial advisor.
Borrowing against home equity or a retirement account might be more forgiving, and come with better tax breaks than high interest credit cards or some loans, but don't dig so deep that other investments lose long-term value.
With recent turmoil in the mortgage industry, banks are tightening credit requirements for home equity loans or refinancing. Retirement accounts, with money already "in the bank" can be tapped without penalty for account holders 59-and-a-half or older, but don't forget the reason you were saving for retirement.
"I always recommend that, first of all, people plan for their own retirement and save for that before they save for their child's education," Murphy says. "When you reach retirement, there's nobody standing there willing to give you a grant or any kind of scholarship or special loans to get through retirement years."
While each family's financial situation is different, take the time to carefully research the best alternatives, Murphy advises." Paying for college is obviously an individual thing depending on the overall financial situation. But it's important to review all your options to see which one works best "¦ and credit cards should be an absolute last resort for paying for college."