Top Ways to Pay for Your Child’s College Education


Whether you’re a new parent or your children are still young, it’s never too early to think about college. After all, you want your children to have the best education possible. Aside from cashing out your life insurance or applying for a high-interest personal loan, there are tips to help you save money and time, and ways you can help cover the cost of tuition. Here’s how to do it.

Savings Bonds

When you invest in savings bonds, and your child goes on to use them for college expenses, you can exclude that income from their annual income at tax time. However, there are restrictions, so it’s best to do some research before you invest. In addition, saving bonds are backed by the government, so there’s little to no risk.

Education Loans

If your child is older and getting to graduate high school, you have several options. You can apply for a traditional bank loan, have your child apply for scholarships or you can apply for a low-rate Private Parent loan. With this type of loan, the adult signs on the bottom line for the child. The interest rates are typically lower and the repayment terms are better overall.

529 Accounts

Sponsored by state governments, these kinds of savings accounts are tax-friendly and usually allow you to deduct your contribution on your taxes. Moreover, when the money is withdrawn for education purposes, it won’t be taxed.

Coverdell Savings Account

This is another type of savings account that can be used to pay for educational expenses. Think of them as a tax-deferred trust fund, which is free from taxation, as long as your child completes their degree in a timely manner. If the funds aren’t used by the age of 30, tax penalties apply.

Open a Custodial Account

UTMAs and UGMAs are essentially the same. You can add as much money as you want to both of these types of accounts. However, it’s best to proceed with caution. Children are allowed full access to the money at 18, so you want to make sure they’re ready for that kind of responsibility.

Roth IRA

Although Roth IRAs are usually considered retirement accounts, you can still use it for your children’s education. But unlike 529 accounts, other relatives can’t contribute money. If you choose to go this route, it’s best to discuss your goals with a financial advisor. In addition, if your child chooses not to attend college, you’ll still have those funds saved for retirement.

Home Equity Loan

Depending on how long you’ve paid on your mortgage, you can also take out a home equity loan. In fact, some parents choose to pay more into their mortgage for this reason. Once they build enough equity, they can then use it to pay for their children’s college tuition.

Buy Permanent Life Insurance

You can also buy a permanent life insurance policy and pay on it for the years leading up to your children’s high school graduation. After enough time passes, you can cash it out to cover the cost of college.


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