It's no news that the cost of college is skyrocketing day in day out. According to CNBC, the average tuition for private colleges went from $15,160 to $34,740 between 1988 and 2018. In today's dollars, that's about a 129% increase. For public colleges, it rose from $3,190 to $9,970 in the last 30 years, which is a 213% increase in inflation-adjusted cost.
These figures are a bitter pill for parents who want to pay for their children's college. Or if you're going to send yourself to college, saving up such amount is a big hustle. But the good news is that we have come up with little and creative things you can save up money for college. Here are ten creative ways to save for college:
Create a bond ladder
A bond ladder may sound complicated at first, but the idea behind it is pretty simple. All you need to know about the bond ladder is that you buy a series of bonds which will mature one by one. It's more like lending money interest-only for a period - a month or a year. For example, if you buy a bond of $10,000 at 5% interest bond for ten years, you'd get $500 every year for the next ten years.
Buy rental properties
Rental properties are income-generating investments you can use to pay for college. Buying a property and putting it on rent is an obvious way to put a dent in tuition bills. Imagine purchasing a rental property at $100,000 when your child was ten years old, and let's say you had to take a mortgage of $80,000 to acquire this property.
Years later, when your child is ready to go to college, your mortgage balance may be around $50,000, but the property must have appreciated to $150,000. That leaves you with about $100,000 on Equity. You could sell the property to realize the Equity to pay for college bills.
Capitalize on the benefits of 529 savings plans
The 529 savings plan is a tax advantage accounts parents can use to invest and save for their children's college costs. However, this saving plan is on a State level and not on the federal level so the tax benefits would vary from States to States. A perfect example of perk parents can try out is to participate in multiple states 529 plans as there is no restriction to one state's program. Another perk is that parents can change the beneficiaries of the account anytime. Perhaps you have three children, and your eldest got a scholarship, you can switch their 529 plan to benefit one of your other children.
Buy prepaid tuition
In many states 529 plan, they offer the option to buy prepaid tuition. So, rather than having an investment or savings account, you'd be paying the State a preset sum of money when your child is still young, and the State will lock-in your child's tuition cost. The idea behind this is that the State will invest the money, and the return will cover the growing cost of your child's tuition bills over time.
Find niche scholarship and grants
There is a scholarship for everyone, no matter your child's passion. The twist is finding the right niche for yourself or your child. So, whether you live in a manufactured home or a mobile home, or you have red hair, or you're a dwarf, no matter your attributes, you're good to go. For instance, the National Potato Council offer a $10,000 scholarship to students bound for agriculture college who declares their love for potatoes persuasively.
Take advantage of ROTC
In the armed service, each branch offers the ROTC (Reserve Officer Training Corps) scholarship. The ROTC is all about the military paying all or part of your child's tuition fee in exchange for your child's commitment to the armed service for a certain number of years upon graduation. When students graduate, they join the military as officers and receive additional training and specialize. In other words, it's a win-win as the students would be getting a deeply discounted or free college education and a guaranteed job after graduation.
Take advantage of AOTC
The AOTC or American Opportunity Tax Credit allows you to knock up to $2,500 off your tax bill per student in a year. The AOTC can be applied to you, your dependents, or your spouse. For the first $2,000 you'd spend on your college expenses, it will earn you a dollar for dollar tax credit. After you get a Credit of 0.25 for every dollar you spend on college tuition of up to $500 on the tax credit.
Co-Op Education or Employer Reimbursement
Some employers are willing to pay for your child's tuition bills in exchange your child will have to work for them on graduation. Another alternative is the cooperative education where students can take advantage of the partnership between local employers and their University. Co-op education differs as some offers parallel employment and education either full or part-time, while others may offer alternating semester with work and study. It depends on the University, but some students may get academic credit based on their work experience and get a salary from their employers to boot.
It's easy to wrap your mind around the idea of house hacking as all you need to do is find someone to pay you for staying in your house. The classic model is first buying a multifamily home, like a duplex, then move into one unit and rent out others. The money generated from house hacking can be used to pay for college tuition.
Start a side hustle
Lastly, you can start a side hustle to create multiple sources of income. A side hustle does not necessarily need to be something time-consuming. Real estate investment is a perfect example of side hustle you can combine with your 9 AM to 5 PM work. You could also try out buying and flipping antiques or vintage cars. The ideas are limited to your imagination.