How to Pay for College if You Started Saving Too Late

How to Pay for College with No Savings

How do you think he paid for college?

I was talking with a friend the other day and she mentioned that I have a lot of good information on PT Money aimed at new parents who would like to help their kids save for college.

She said, however, that she was interested in my opinion on what I would do if I were sending my girls to college next month and was just getting started with planning to help them fund college.

Great question! Here’s what I’d say to any parent of a teenager who’s just about to head to college:

Get Perspective

First, don’t beat yourself up too much over not starting sooner. College should really be an expense your kid (now adult) takes on. It’s nice if parents of young kids can take the extra step to save a bit for their child, but it’s by no means a necessity.

At 18 your kids are adults and their investment in college is a down payment on their earnings for the rest of their lives. Hopefully you’ve been taking care of you and you won’t in turn become a burden on your kids someday because you didn’t prepare for your own retirement.

If you haven’t already, you need to have a meeting with your kid about where you stand to help them financially. Be brutally honest and help them to understand that college is primarily going to be their responsibility, both academically and financially.

I read a horrible story about a Mom who took her daughter’s life and her own, partly because she didn’t want to be honest with her daughter about her lack of college option because of poor family finances. Don’t lie to your kids about their future.

529 College Savings Plan?

Next, I’d say there still might be time to take advantage of a 529 college savings plan to provide tax advantaged dollars towards their education. If you have some cash to help them pay for college, consider stuffing it in their 529 college savings plan and use those funds to pay their tuition.

Even if it’s just a few thousand dollars it could mean a decent State tax break and over four years it could mean tax-free earnings towards their education. Although, with just a small window to earn, your don’t want your funds to be at risk. So your tax advantage will likely be small.

Liz Weston actually makes an excellent point against doing this, in her new book, There are No Dumb Questions About Money. She says,

“You wouldn’t be getting any real growth, so the tax benefit of a 529 plan is miniscule. What you would get are restrictions on how to use the money and possible complications for your tax returns. If you want to use education tax credits, for example, you won’t be able to apply those on expenses you’ve paid with a 529 withdrawal.”

This is a great point and you should likely think long and hard before using a 529 plan at this point. Instead, put the money into a safe, risk-free savings vehicle that hopefully would help to keep up with inflation over the next few years. Although, sadly, with education costs rising by as much as 6% a year, you’re going to have a hard time keeping up.

Help Your Kid Look for Assistance

Next, I’d say make sure your kid has applied for federal assistance and scholarships. Even if it’s too late to apply for assistance this year, you can always use the funds next year. So learn all you can about the FAFSA. Remember, college is at least a four year proposition (more for some). Just because you’re two months away from enrollment, it doesn’t mean you can’t plan for the rest of their school.

The free application for federal student aid will help to determine if your kid qualifies for subsidized student loans, grants, or work-study programs. Your tax dollars are paying for this aid, so you might as well take advantage of it.

Federal student loans get a bad wrap from people who don’t want to pay them back, but I think they were one of the best money decisions I could have made. I left school with $25,000 in student loans and took a job paying me $36,000 annually. It’s hard to find that kind of return anywhere. Don’t forget about scholarships. Apply for as many as you can.

Encourage Wise Spending

Next, I’d encourage your kid to make a wise spending decision. How much they need for college can vary greatly based on the school they choose. Talk to them about what college means from a financial standpoint: how it’s an investment in future earnings. Meaning, they should pick a degree that pays off (i.e. nursing, education, accounting, etc.), and pick a school that has a good balance of credibility and cost. Your kid should also be encouraged to look into accredited, two-year schools to handle some of the initial college courses, before heading off to a university.

Tell Your Kid to Make it Happen

Next, I’d advise your kid to take the advice I would give anyone wanting to afford something: make some extra money to pay for it. Your kid should be encouraged to look into working their way through college, or using the service in the military to help them afford their education.

Other tactics: sell some things, start a small business, work odd jobs, etc. If you want it bad enough, you’ll find a way to pay for it. You could even implement some type of matching program where you match your kid’s earnings.

What Not to Do

Finally, I think it’s worth noting what I would not do at this point. I would not raid my retirement savings to help my kid afford college. I would also not pay for their college costs on a credit card or personal loan. If you can pay a little as you go (like with a payment plan from the university) that’s great. But don’t go into debt, or worse, risk your retirement for your kid’s education.

What advice do you have for parents of teens about to head to college that don’t have funds to help their kids?

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About Philip Taylor, CPA

Philip Taylor, aka "PT", is a CPA, blogger, podcaster, husband, and father of three. PT is also the founder and CEO of the personal finance industry conference and trade show, FinCon.

He created Part-Time Money® back in 2007 to share his advice on money, hold himself accountable (while paying off over $75k in debt), and to meet others passionate about moving toward financial independence.


    Speak Your Mind


  1. You say not invest in a 529 plan.  What about an educational IRA for your kids?

  2. Julie at The Family CEO says

    This was our situation exactly. We had a little set aside for college, but not much, and the crash of 2008 happened just before we were going to need it. With a daughter in college and a son in high school, we’re employing an “all of the above” strategy. We’re combining an affordable school, some scholarships, part-time work for my daughter, and current earnings (my online, freelance writing income goes toward this goal) and so far we’ve been able to avoid any debt. It’s not easy, but it can be do-able.