I was debating on doing the "pre-paid college" thing for my daughter when someone told me it is very restrictive to what schools she can attend. She is only 9 but I have to start preparing for her future. How does one go about getting a college loan/financial aid? Will a loan cover books? I know I have time but I am trying to educate myself on this before it is too late...

Check with your state's Board of Regents office in your capital and ask if they have a pre-paid tuition plan. This would qualify for prepaid tuition at a public school in your state, but many states have suspended new enrollment in their programs because returns on investment have been so poor with interest rates so low.

Some private colleges in my area announced "private prepaid tuition plans" but I would beware. If my child doesn't have the grades/SAT or ACT to get into a private school, then what do I do? Prepaid tution doesn't mean acceptance at their school.

There is also a pre-paid 529 savings plan. Contributions I believe are tax deductible or are pre-tax and this plan is portable so you can use it if you relocate in later years or your child wants to attend out of state.

Students begin the financial aid process by completing a FAFSA (Free Application for Federal Student Aid). Most high schools sponsor a financial aid night for parents of juniors and seniors. Colleges are required to establish a 'budget' for students so you can compare total costs (books, fees, dorm, etc). You can borrow the difference between tuition and the budget costs.

There are some pitfalls to 529 plans that can be overcome in other ways. Check out http://money.howstuffworks.com/529.htm, they have a pretty good information on 529's and some alternatives.

I applaud your attention to this issue far before your child is in school. Colleges have a vested intrest to get as much financial aid for your daugeter at the time of enrollment so working with them is definately in your best intrest.

-Paul
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That's the thing...all of the savings plans have downfalls to them somewhere. I was even going to look at the Roth IRA and I currently have savings bonds for her that relatives gave in the past. I have been told the less money I have the better it will be to get loans. I have been told that I need to save tons of money now. I am confused and I just don't want it to be an issue when she goes. My credit isn't great but it isn't horrible. I am sure by then it will be fine, I only have 1 outstanding credit card I am paying off and no other debt. Would I get the college loan or her?

If you have a qualified savings plan in place for your child (529, savings bonds etc) they are not counted as an 'asset' for financial aid purposes.

When you complete a FAFSA it will only take into consideration your personal assets (cash/savings/checking) and investments if you file a 1040 long form. The FAFSA more heavily weights items such as annual income, household size and number in college. Keep in mind this is current info and does not reflect where the rules are headed in the future.

All students are eligible for a student loan, regardless of income but the loan is currently limited to the student's year in school. Freshmen are now only allowed to borrow $2625 for an entire year. Then the parent is awarded a parent loan.

Students do not have to be credit worthy as the feds guarantee student loans. Parents, however do have to be credit worthy. Currently, parent loans are not score driven but lenders do look at co's, late pays, bk's, etc.

This is just my opinion, but having lived through SL hell recently, might I suggest that you try to come up with a solution for your child that would NOT include SLs. I mean, obviously there are some situations where it can't be avoided, but as many here can attest, most kids are not financially responsible when they undertake what can be an unbelievable amount of debt. It leads to a LOT of trouble, and personally, I think it's a great disservice to a young person to come out of school with a pile of debt larger than some home loans (and with private school loans, that is certainly possible).

So, I am putting away whatever money I can afford for my kids' education after HS. It may not get them all the way there, but it will be a good head start. Consider the IRAs and other ways to save money, but IMHO, it's not fair to expect your child to pay for their own education entirely on their own with student loans. As one poster said, the amount one can get right now doesn't entirely cover the cost of a year anyway, but more importantly, give your child every opportunity to come out of school debt free if at all possible.

It's just my two cents, so take it as you like.

I would never have my daughter pay for her own college! I am her parent and that is what I am for! I am all new to this and just trying to find out what my options are. If I do the pre-paid plan route I have started very late and may only be able to save up for 2 years worth but it's 2 years at today's rates atleast. I have looked into the 529, bonds, IRA's and just putting money in a savings acct. I never said I was going to have my daughter pay for her own college and I hope no one took it that way. I will pay all her loans and I will help her all I can. I do not know how student loans work so I wanted to know. IF you don't have the funds available I wanted to know how one pays for college...whatever debt she incurs I will pay.

I'm sorry; I didn't mean to imply that you would ask her to pay for her own education. :shock:

I guess I am puzzled by people who think that getting a SL is the answer. It really REALLY sets kids up for failure. I wasn't a kid, and it did a number on me! So ... that's all I was saying.

I'm sure you'll do whatever you can to pay for the expenses. And you know, it's not such a bad idea for a kid to help pay for their expenses by work/study or something. I knew someone once that did that ... a formal work/study program, and the good thing was, it established some good work history, gave her money to pay for school (she paid for it herself) and she came out the other side debt-free.

*Edited to include:

A coworker here was telling me that her father told her he'd HELP her get through school, but that she would be contributing to her own expenses. She worked and she says it wasn't easy, but she really appreciated her education more and understood why her dad told her she would have to contribute, but she also emerged debt-free. She said paying for college was the best education she ever could have received, and she has never taken it for granted.

I am just starting my quest of the different ways people pay for college and I am SURE by the time my daughter goes to college it will be SO expensive! (not like it laready isn't...) I wish I could talk to someone who has used a state or nationwide pre-paid college program to see how it is. If I invest money I want the highest interest I can get too. It's frustrating, you want to provide for your kids education and it is so expensive.

One other thing ... I know the prepaid tuition thing sounds great, but at least here in Texas, the future of our program is uncertain. When the state started having money woes, this program was one of the first to become shaky. I know that they are not currently accepting new members, and there was some question as to how those who had already paid into the fund were going to be handled.

So ... I wouldn't plan on this being the ONLY means of paying for college. I sorta feel a good CD would be preferrable to this program right now.