Northwestern Mutual: 3 Ways Grandparents Can Help Pay for College
MILWAUKEE, December 22, 2022 (Newswire.com) - Northwestern Mutual:It's never too early to start saving for college, and grandparents can play a significant role in helping to make college more affordable for their grandchildren. There are a few different ways that grandparents can help with college savings. Each option has its advantages, so it's important to research and figure out which one makes the most sense for your situation. Let's look at a few:
Open a savings or investment account
Grandparents can start saving for college early by opening a savings or investment account on their grandchild's behalf. This could include a tax-advantaged 529 college savings plan, which allows the grandparent, the account owner, to make investments on their grandchild's behalf. Other grandparents may find something like a Coverdell education savings account or even a UTMA or UGMA custodial account works better for their needs. Whether grandparents choose a custodial account, 529 plan, or something else, it's important to research the specifics, as these accounts come with different restrictions and tax advantages.
Paying some of the tuition directly
Most college students rely on some form of financial aid to help pay for their education. Scholarships, grants, and loans are all popular sources of funding, but there is another way to get help with tuition costs: grandparents can contribute directly. By paying some or all of the tuition, grandparents can have a major impact on a student's ability to attend college.
There are a few things to keep in mind if you're thinking about making tuition payments for your grandchild. First, be sure to communicate with your grandchild about their educational goals and what they're hoping to accomplish in college. You don't want them to make any promises that they can't keep or that will put undue pressure on them. Second, be realistic about your own financial situation. You may be able to cover a semester's worth of tuition, but it's unlikely that you'll be able to pay for four years of college. Finally, remember that there are other ways to help your grandchild succeed in college besides writing a check. You can offer moral support, advice, and encouragement every step of the way.
Co-sign for loans
College is an expensive investment, and many students rely on loans to help cover the cost of tuition and other expenses. Grandparents can help their grandchildren meet this financial obligation by co-signing for a private student loan. This can give the student access to a lower interest rate and more flexible repayment terms. However, it is important to remember that the grandparent is legally responsible for the loan if the student defaults. As a result, grandparents should only co-sign for a loan if they are confident that their grandchild will be able to make the payments. Otherwise, they could end up damaging their own credit score and putting their financial future at risk.
Source: Northwestern Mutual