If you’re going to have money to pay for college, planning ahead is essential. Most colleges and universities cost more every year, and increases in the cost of education go up much faster than the income you earn. That means you have to put money aside now to have enough later.

Unfortunately, most regular savings and money market accounts only earn 1.5% to 3% interest. That means that money you save in a bank savings account will lose value over the long term, lagging further and further behind the cost of education. Clearly, you need a better place to keep your college money.

INVESTING IS BEST
Your best bet is to invest, and invest early. Investments aren’t guaranteed the way a savings account is guaranteed, but the growth they offer gives you a chance to keep up.

Fortunately, there are college-savings investment accounts, including the popular 529 plans, that give parents and prospective students both tax advantages and flexibility. The more time you have, the more aggressively you can afford to invest.

But if your child will be going to school soon, or if you plan to go back to school in a few years, there are also strategies that can help you make the most of the time you have.

WHEN YOU’RE THE STUDENT
Maybe you started work right out of high school, but you mean to go to college eventually. Maybe your schoolwork was interrupted, and you never completed your degree. Or maybe you want to earn a higher degree to advance your career.

If you’re one of the many people already in the workforce who plan to go back to school, you can use some of the same savings plans available to parents who are saving for their children’s education. Just remember that the less time you have to meet your goal, the more conservative you probably want to be with your investment choices.

If you’ll be over 24 when you enroll, colleges will no longer consider your parents’ income when calculating your financial aid package, so you may become eligible for more assistance. That doesn’t mean you should hold off on college if you’re younger than that, since you can always discuss your own circumstances with the college when negotiating your financial aid.

And yes, you can negotiate by providing additional information and discussing your ability to pay with the college. If they’ve accepted you, they want you to attend.

OUTSIDE LINKS

studentaid.ed.gov
The Federal Student Aid website has a section on repaying loans, including information on loan forgiveness.

www.ed.gov/inits/hope
Learn about the Hope Scholarship and Lifetime Learning Credits, plus other tax cuts for education under the 1997 tax act.

nces.ed.gov/ipeds/cool
Look up colleges that meet your criteria at College Opportunities On-Line (COOL), from the National Center for Education.

www.pueblo.gsa.gov
At the Federal Citizen Information Center, click on Education to find out about alternative ways for adult students to earn education credits for life and work experience and by taking exams.