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College Finance Tips for 40-Somethings: Fighting a 2-Front War

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In decades past, people in their 40s had largely already put their own student-loan debts behind them and were able to turn their attention to preparing to help their children pay for their educations. More recently, though, educational debt has become a persistent trouble for Americans, weighing down their finances well into adulthood.

Indeed, a 2013 Federal Reserve Bank of New York study showed that student-loan delinquency rates among those 40 to 49 were the highest of any age group as of the fourth quarter of 2012 -- more than 16 percent -- with other age groups falling in the range of 9 percent to 13 percent. With a third of student loan debt held by Americans over age 40, many parents don't have the luxury of being able to give their children's education as much financial attention as they'd like.

Yet for those who have children, the 40s are often college-savings crunch time. To fight back against student debt on both fronts, let's look at some tips to help you juggle all the issues you face in your 40s.

1. Finalize Your Own Payoff Plan.

If you still have your own debt outstanding, you should establish a firm plan on when and how you'll get it paid off. Most borrowers who've extended their loan repayment plan into their 40s have already taken advantage of programs like consolidation or income-based repayment options, so in many cases, all you'll need to do is project current payments forward to get a firm handle on your cash flow and what impact your loans will have on your overall finances, both for yourself and your family.

2. Ramp Up Saving for Your Kids.

Regardless of whether you've paid off your own loans or still have further to go, you'll want to look into taking greater advantage of tax-favored 529 plans and other college savings vehicles as your kids enter their teens. Even if you're late to the college-savings game, anything you can set aside for your kids will help reduce their own eventual loan burden while also potentially giving you access to state income tax benefits and other tax breaks. With those in their 40s often starting to get into higher tax brackets, saving through a 529 plan can be an even better deal than it was earlier in your career.

3. Start the Scholarship Search.

Student loans get most of the attention in the college funding discussion, but free money from scholarships that you never have to pay back is obviously far more valuable.
With thousands of different scholarships offered by schools, employers, private individuals, charities, and other groups, you can find potential scholarships that fit your economic situation as well as your child's educational interests. You have to be somewhat careful to avoid scam artists who prey on students by charging for scholarship-search services that fail to deliver on their promises, but with the right resources, you can research legitimate scholarship opportunities. To get more information, start at the U.S. Department of Education's website.

4. Focus on Financial Aid.

As your kids approach college, it's also important to get your finances in order so that you maximize the amount of financial aid your children will qualify for. That means getting smart about how financial aid works and how schools take your assets into account in determining whether your kids qualify for aid packages. The rules governing financial aid are sophisticated, but in general, keeping assets in parents' names is smarter than having assets directly in a child's name. Moreover, certain assets, such as your personal residence, retirement accounts, and insurance policies, are exempted from the financial aid calculation, making it smart to consider shifting assets well in advance of your children reaching college age in order to put them in the best position possible to maximize their aid eligibility.

You Can Win Both Battles

Even 40-somethings who are dealing with their own student-loan debt as well as having to pay for their kids' college education can succeed in accomplishing both tasks. It's not always easy, but by paying attention to these four areas, you'll be in the best position to handle your entire family's educational finances.

You can follow Motley Fool contributor Dan Caplinger on Twitter @DanCaplinger or on Google+.

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9 Comments

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toosmart4u

The GOP did not do the student loans any justice this past summer. Yes, it will help this coming school year but the interest can go up in the years after that. The GOP is NOT doing a very good job controlling the purse strings of this country. They only want to spend to improve their party and NOT the country. We need the democrats back badly.

August 21 2013 at 2:42 AM Report abuse rate up rate down Reply
conyersassoc1

If you believe this BS. you will pay thousands more than you have to to get a quality education. Example: 529 plans count against you 4 times more than parents investing or savings. Scholarships from public or private organisations take away dollar for dollar from financial aid. The best solution is a quality college planning organisation to guide you through the process so you get the most money available and you don't waste money. It is possible for your student to attend Harvard, Duke or John Hopkins for the same or less money than a state school as an example. Qualifying for financial aid is a business that the Universities do everyday. You don't. So how do you get them to open up their purse strings? By the way 97% of all money available is controlled by the Universities. So you better know how to play the game or have someone working for you that does. There is a lot more you should know. This is just a taste.

August 20 2013 at 5:04 PM Report abuse rate up rate down Reply
katlady20

How about not going to college or going on your own dime? How about saving for school? How about working your way throughm school? How about taking one class at a time? How about not taking BS classes or changing your major ten times? How about not taking so much federal money to pay your room and board, your everyday expenses......how about cutting out party time, less cell phone expenses, no girl or boy friend expenses...how ablut the first quarter/semester you pay for it.......you pass the courses with a C or better......the feds, ie. my taxes, reimburse you for what you actually passed then you take that money and recycle it back to pay for the next round of classes. No forgiveness on your school debts! Dont go if you cannot afford it, dont waste time on frivolities, start a job at the bottom and work your way up. Work at a job that helps pay your way. Sheesh, SO SICK of thes kids complaints. Go to a school that actually has a four year degree in FOUR years! What a shocker.

August 20 2013 at 11:56 AM Report abuse rate up rate down Reply
2 replies to katlady20's comment
conyersassoc1

How about getting the University to want you so much, that they will pay for you to go there, Yes, this can happen if you know how to play the game. With proper planning most of your how abouts go away. With the exception of to much partying. how about no loans.

August 20 2013 at 5:09 PM Report abuse -1 rate up rate down Reply
jmcalif

Based on your opinion = keep the poor & disadvantaged UNeducated & the wealthy ones college educated. The real problem is a college education should not be so expensive....we need to lower the costs so student loan debt is not this kind of an issue. BTW can't get a job nowadays if you don't have an EDUCATION & your solution of work your way up is what you have to do even ATER you graduate with a degree! Your comment sounds personal to me and charged - you sound bitter - did'nt get to go to college?? I think there is so much you do not understand about financial aid and you are generalizing. I can't wait for my tax dollars to help the next needy student who deserves an education but can't afford one.

August 20 2013 at 11:16 PM Report abuse +1 rate up rate down Reply
krazzicraig

Debt is the bread and butter of banking . The pay almost nothing on saving accts. ,yet lend out the funds at 5 to 15% . If someone has $5000.00 in a saving acct. they they should look into joining a peer to peer loan program . These programs have returned on avg. 10%. That is 10 times what banks pay .

August 20 2013 at 9:37 AM Report abuse rate up rate down Reply
BradleyN

A lot of people are in debts today. The huge amount has student loans which is impossible to pay back. I live in Quebec and it’s quite difficult here to find good money lenders for getting clear in debts. That is why I have to borrowadittional money online here: http://northenloans.ca/payday-loans-quebec.html . It’s quickly and convenient. You should have a plan for paying back your student loan. Good luck.

August 20 2013 at 9:02 AM Report abuse rate up rate down Reply
rsmcfarlan

papadon one problem with your analogy. The jobs young adults can earn to work there way through college are pennies on the dollar with the amount of debt they will have. The cost colleges are charging has to be reevaluated. Otherwise are children are on a pathway to financial destruction. Most college degrees carry a very low ROI. So makes those degrees a bad investment.

August 20 2013 at 8:55 AM Report abuse rate up rate down Reply
1 reply to rsmcfarlan's comment
papadon.don

Baloney... it was just as hard for ME to pay for college back then... do ya think I didn't work my ass off to get there?? I have a physics degree... WHAT A GREAT INVESTMENT!!

August 20 2013 at 9:57 AM Report abuse rate up rate down Reply
1 reply to papadon.don's comment
NixonVet

Get real, look at the chart showing the increase in college costs versus real income since the 1960's, its impossible for a kid today to work and pay 100% of their college bills, as I did in the late 1960's.

August 20 2013 at 12:02 PM Report abuse +2 rate up rate down
papadon.don

Where is it written parents must pay for kid's college?... didn't they ever hear of WORK?? I worked my way thru college way back in the dark days of education... in 1959. Had ZERO debt upon graduation. Too much emphasis is placed on college today... kids must develop a solid work ethic and direction first. Collage ain't for everybody... don't force yourself there! I wanna play MLB and hit a homer in the AllStar game..... pipe dreams!!

August 20 2013 at 7:25 AM Report abuse -2 rate up rate down Reply
1 reply to papadon.don's comment
conyersassoc1

You are to be commended. But, what if you could have had the school pay for most or all of your college education. With proper planning it could have been done, by using available resources such as college planning organisations that know how to play the game and do it every day..

August 20 2013 at 5:13 PM Report abuse -2 rate up rate down Reply