Your student worked hard to get into college. Paying for school is the first test families will have to take. Make sure everyone has done the work and considered the options and strategies available.

Payments for college come from three sources:

• Money supplied by the student and family through savings, like 529s,
• Money awarded based on need or merit, such as grants and scholarships, and
• Loans taken by the student, parent or both.

Given a choice between savings and loans, savings are by far the less expensive of the two. In addition to interest repaid, student debt may have a far reaching impact as loan repayments take the place of retirement savings or mortgage payments.

Saving for college through a 529 has considerable benefits, including:

• Professional management,
• Tax-free growth, and
• Preferable treatment in financial aid calculations.

Navigating the financial aid process is essential

Little can be done to affect what financial aid is awarded based on merit — aside from dedication to school or athletics of course, but, competition is fierce and few receive significant merit-based aid. However, a quick study of the financial aid process can help both ensure students are positioning themselves for the maximum amount of need-based aid their family financial situation allows and use 529 savings to their fullest. Together, savings and thoughtful planning can mean that both students and parents are able to pass the test of paying for college with flying colors.

Download 529 Plans: Major Opportunity for Saving, Minor Financial Aid Impact for more information on financial aid.