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Little Known Ways Parents Can Pay For Their Child’s College Education

Updated on May 22, 2013
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“What do I do if I can’t afford to send my daughter to college?”

That’s what a mom of a graduating high school senior asked at a recent college open house. The whole room filled with parents fell silent to hear the answer.

As graduation becomes a reality for high school seniors in the next weeks, many parents wonder the same thing. Let’s face it; college is expensive. Without financial assistance or support, it can cost more than five figures to attend college today. Some schools cost even more. Those costs can be a massive burden on cash strapped parents.

If you are planning on sending your son or daughter to college but don’t know how to afford it, you probably should look at other alternatives before shutting the light off on a child’s dreams. Regardless of your income, child’s grades or location, you may be able to get some help to send your child to college through private funding. Below are a few different ways to pay for your child’s college education.

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Private Funders or Gift Givers

Private funders are composed of individuals just like you and me. Some people refer to them as donors, sponsors, supporters, endorsers, benefactors and even friends. They support college dreams all the time. With tax laws in their favor, it’s pretty easy for a private person to give unlimited sums of money to support higher learner. One way is to make a tuition-only payment directly to the institution that your child attends, but that’s only one way. There are many other ways to get your child’s college education funded. Learn more below.

Find a Wealthy Gift Giver

As you know, wealthy people are taxed heavily on their assets, investments and income. By reducing their estate and income taxes, they can reduce their tax liability. Gift gifting is a solution many of them use. In order to leverage their gift giving rich people use different types of trusts, insurance, LLC’s, promissory notes and other financial planning tools. These tools can be set up to support your child’s college education.

Where can you find a wealthy gift giver?

If you don’t think you know how to find a financial gift giver, think again. Your network may be your goal mine. Even if, you don’t know one your family, friends and coworkers might. Ask people for help to find one. A good source of information is your accountant or attorney. Most have wealthy clients and if they don’t ask them for help to find one.

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Engage Family & Friends

Your family members and friends can provide or gift up to $13,000 annually to help support your child’s education. Thanks to the federal gift tax law, your family and friends don’t have to pay tax on the $13,000 gift they offering your child. And your child won’t owe income tax on it either.

Education Savings Accounts and 529’s usually are used by the family to fund educational expenses. There are many advantages to having one of these accounts from tax deferred growth on earnings to tax free distributions on educational expenses. Funds can even be transferred to another family member if they are not used by the intended beneficiary.

Your Private Employer’s Gift

Private employers provide educational assistance too. If your child works for an company that provides tuition assistance then he or she may be able to get up to $5,250 in tax free education benefits each year. The employer could spend more than the $5,250 but anything that’s paid over that amount would be taxed.

Companies that teens typically work for such as Walmart, grocery store chains and even fast food chains have some sort of tuition assistance program. Although the programs are typically called “tuition assistance” their benefits, far exceed paying only tuition. Although meals and housing are excluded an employer can provide educational assistance to pay for fees, books, supplies and equipment.

Ask your child to find out if his company has a tuition assistance program. If his company offers one then apply for it. If not, maybe your child can look for a job with an organization that does.

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A Final Word about Private Funding

Private investment also has limitations. It may affect your child’s ability to obtain government financial assistance. Gifts that exceed the annual gift exclusion amount may be taxed. Ask your child’s financial aid counselor for help. Like all business decisions get professional advisor from an advisor or an accountant before you take any action.

At first glance, the college sticker price might cause you to run for the hills, resist the temptation to give up. Before you say no to your child’s college dreams explore all options. Private funding just might be the practical approach your child needs to get his educational expenses paid.

How about it? How do you feel about reaching out to family, friends and wealthy individuals for help?

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