Are you or a family member on the cusp of making college attendance decisions? Or have you already decided? So, how will college expenses, tuition, room and board, books and incidentals, living expenses, how will they be paid?

In Central Oregon we have great options where students can live at home while they attend COCC or OSU Cascades. That can save a significant amount of money. But that still leaves many school costs to be funded.

This is the second in a series of articles designed to help students and their parents make the best choices on how to pay for college.  Read the first in the series, Pros and Cons of College-Payment Strategies- Part 1.

Custodial accounts

Pros: You manage the account until the child reaches 18 or 21, depending on your state. After that your adult child owns the account (this could be a con).

There are no limits on how the money can be used. There’s no limit on how much a parent can put into a custodial account.

Full-time students younger than age 24 pay no tax on the first $950 of unearned income and pay the child’s rate on the next $950. Earnings above $1,900 are taxed at the parents’ marginal rate. Investment choices aren’t restricted.

Cons: If your contributions surpass $13,000 a year you’ll have to pay a gift tax. Large balances in a custodial account can hurt chances for financial aid.

Private scholarships

Pros: The money is free and many scholarships are awarded to students based on need or special interests.

Cons: Schools might reduce aid if scholarships and aid combined are more than a student’s calculated need.

With soaring tuition costs, borrowing is often necessary even after accounting for savings and scholarship money. Investigate government-sponsored loans, federal work-study programs, state programs, and institutional aid with the Free Application for Federal Student Aid (FAFSA) form.

Consider federal PLUS loans. Private student loans come into play after all other resources are exhausted.

Basic Savings Accounts

Children with savings accounts have improved early childhood development and future financial capability. Adults who had savings as children have improved financial literacy, a greater diversification of savings, and a higher level of savings overall.

Pros: Easy to set up, flexible deposit options and great at instilling lifelong savings habits for children.

Cons: Can be easily accessed and used for other things,and building significant amounts takes time, patience and contributions.

According to CFED, children with college savings have greater college expectations and do better academically.  Even though it’s never to late to start, having that savings build over time, with regular deposits, can provide a source of funds for school but more importantly can better position your child for success!

Whether college expenses are in the distant future or weighing you down today, the professionals at Mid Oregon Credit Union can help you figure out the best savings strategy to avoid negative tax consequences and the best loan options when all other sources are exhausted.