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How to Pay for College: Strategies and Tools

College Will Cost More Than You Think,
Here are Some Strategies for Paying Your College Bill

You may be considering the cost of college and wondering how you and your child will ever pay for it. And, unfortunately, most parents underestimate the total cost and haven’t saved enough. If you have done absolutely nothing and your child is heading to college in the fall, at a minimum complete the FAFSA application.

A 2017 Boston Research Technologies survey found several interesting insights from over 1,980 surveyed families concerned about college costs and how to pay for college tuition. One surprising find was that parents of high schoolers underestimated by an average of $70,000 and parents of kids in preschool or younger underestimated by an average of $110,000 the total expense.* (Source Fidelity College Savings IQ Survey.)


What Parents Estimate College Will Cost

Average Projected Cost of Four (4) Years of College

Now In High School- PUBLIC



Now In High School- PRIVATE



Now In Preschool- PUBLIC



Now In Preschool-PRIVATE



Don’t lose hope. There are several ways to put away money, and find money, to offset some of the cost of college. These are some ideas for you to dig into further (as we are limited by space) to learn more about which tools may be most appropriate for your situation.

529 COLLEGE SAVINGS PLAN: Money saved in 529 plans grows tax-free and is withdrawn tax-free as long as it is used for approved college costs including tuition, room, board, books, fees, lab costs and more. Another perk—if you use your state’s endorsed plan you may also qualify for a tax deduction on your state tax return. The account owner (usually a parent or grandparent) maintains control of account even after minor child reaches age of majority (a big plus for many parents). Grandparents are often using to gift education costs to grandchildren and move funds out of their estate (and probate). The beneficiary can be changed to a related family member if needed, there is no income limit for establishing and funding plans and maximum account sizes vary by states. Virginia now allows up to a whopping $500,000 per beneficiary. (Source:

SERIES EE Savings Bonds: Interest is not taxed within limits if bonds are cashed in during a year when a family member has qualified higher education expenses.

SCHOLARSHIPS: A must read is your college’s scholarship listings. More good resources for unusual and surprising scholarships can be found in books (and sites) like the “Ultimate Scholarship Book 2018” listing millions of dollars in scholarships for a range of interests and backgrounds from Arkansas to Art, Engineering, Farming, Sociology, Nursing, to Zoology—and more.

According to the site ScholarshipPoints (Mollie Allen, 2017) a NerdWallet analysis reports the number of Pell-eligible graduates who didn’t complete the FAFSA totaled 821,041 students nationwide. (In California alone, more than 100,000 seniors did not file their FAFSA and, as a result, missed out on $396,401,205 in potential Federal Pell Grant aid). You can’t get student aid and college scholarships if you don’t apply, so be sure to get started here:


AMERICAN OPPORTUNITY TAX CREDIT (AOTC): Maximum of $2500 per student (if there are $4,000 of qualifying expenses). Excludes room and board costs and is available for tuition, fees, textbooks and course materials in first four years for the parent or child (dependent). No less than half time and income phase outs apply.

LIFETIME LEARNING CREDIT(LLC): Reimbursement for qualified tuition and related expense per family up to $2,000 per year. Must have spent $10,000 in the year to get full credit, based on 20% factor of qualified expenses. Can be used for undergraduate, graduate or professional degree programs and claimed for unlimited number of years. Income phase outs apply.

Note that the AOTC and LLC may not both be claimed same year for same student.


Pell Grants: outright gifts from government based on student need and cost of chosen school.

Federal Supplemental Educational Opportunity Grant (SEOG) Program: grant for undergraduates with exceptional financial need managed by colleges and students automatically considered when they submit a FAFSA form.

Federal Perkins Loan Program: Federally funded program administered by colleges and provides up to $5500 a year for undergraduate students and $8,000 for graduate students with a ceiling of $27.500 and $60,000 respectively. Automatically considered with FAFSA form.

Additional federal programs include college work-study, PLUS loans, subsidized and unsubsidized Stafford Loans.

Other sources may be Traditional IRA and ROTH IRA accounts. These avoid the 10% penalty for taxpayers who use distributions to pay for qualified higher education expenses for the taxpayer or a close family member. Federal and state taxes may be owed on distributions from these accounts. 

Another source could be a home equity line of credit and uniform gift to minor’s custodial accounts. 

It’s important to reach out to the financial aid office of the college you/your child will be attending to consider these and other programs that could help offset some -or all - of the cost.

Lastly, if you have done nothing at all, complete the FAFSA application at a minimum; don’t pay way more than necessary simply because you think you don’t have the hour and half or so to complete it.

Securities offered through LPL Financial. Member FINRA/SIPC. Investment advice offered through Colonial River Investments LLC, a registered investment advisor.  Lions Bridge Financial Advisors and Colonial River Investments LLC are separate entities from LPL Financial. Lions Bridge Financial Advisors, 2110 William Styron Square, Newport News, VA 23606 (757)599-9111

Prior to investing in a 529 Plan investors should consider whether the investor's or designated beneficiary's home state offers any state tax or other state benefits such as financial aid, scholarship funds, and protection from creditors that are only available for investments in such state's qualified tuition program. Withdrawals used for qualified expenses are federally tax free. Tax treatment at the state level may vary. Please consult with your tax advisor before investing.

The Roth IRA offers tax deferral on any earnings in the account. Withdrawals from the account may be tax free, as long as they are considered qualified. Limitations and restrictions may apply. Withdrawals prior to age 59 ½ or prior to the account being opened for 5 years, whichever is later, may result in a 10% IRS penalty tax. Future tax laws can change at any time and may impact the benefits of Roth IRAs. Their tax treatment may change.

Contributions to a traditional IRA may be tax deductible in the contribution year, with current income tax due at withdrawal. Withdrawals prior to age 59 ½ may result in a 10% IRS penalty tax in addition to current income tax.