The 33 % rule: Practical advice on paying for college.

I get a lot of releases on how to pay for college, most of which involve a product. I thought this advice from Josh McWhorter, president of Black Oak Asset Management in Cartersville, was practical so I am posting it here for any parents grappling with college costs.

“One good thing about college tuition is that it is not due all at once,” said McWhorter. “You can pay for each semester as it comes, which means you still have time to save before each enrollment period. With proper planning, you can develop a financial strategy that will help you save the necessary amount of funds to pay for college each semester in a pay-as-you-go plan.”

McWhorter suggests that parents use a “33 percent rule” to help pay for college:

• Parents Pay 33 percent (through long- or short-term investments, savings plans, or current income)
• Student Receives Scholarships or Borrows 33 percent (the first goal should be
scholarships followed by loans, if necessary)
• Student Pays 33 percent (students should begin saving money before entering
college, work a part-time job during college, or participate in a work-study
program, which often includes free tuition)

Tips for Parents
• Remember, you can borrow to pay for college, but not for retirement. Unless, you are doing a reverse mortgage, most banks aren’t willing to loan money to someone 65 years old with no income and no assets. However, if you are borrowing money to send your child to college, financial institutions may be willing to offer you or your child a loan.

• Send your child to a school you can afford. He or she can even start at a
community college, which generally has lower tuition rates, and then transfer to a
state university during the sophomore or junior year.

• Encourage your child to take financial responsibility. As a result, he or she will
learn how to effectively manage cash flow, limit debt and increase assets. Also, if
your student has less time to “goof off,” he or she is more likely to develop strong
time-management skills. Students may also be more committed to succeeding in
school if it is on their dime and not someone else’s.

Tips for Students
• Start with scholarships. Numerous scholarships go unclaimed every year
because students don’t do the legwork necessary to discover and apply for
financial assistance. (Note from Maureen: I know people say this a lot, but 98 percent of student aid given out in this country comes from the colleges themselves.)

• If scholarships won’t cover 33 percent, then check out student loan options. But do your
homework and know what type of loan best fits you.

• Choose a school you can afford. If you need to, start at a community college,
which generally has lower tuition rates, and then transfer to a state university
your sophomore or junior year.

• Only borrow what you need. You don’t have to borrow the maximum amount.
And remember that you will have to repay the loan. Even bankruptcy will not
eliminate student loan debt.

• Use the loan for school-related expenses only.

• Find out if your school has a work-study program, which may cover your tuition or
at least a big portion of it.