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Sending someone to college is a pricey proposition—and growing more so. College costs continue to outpace inflation, jumping 3.7% last year. Add up tuition, fees, room and board and books and a moderate, in-state public college will now run you about $23,410 annually, according to the most recent report by the College Board. If you attend a private institution, you can expect to pay a whopping $46,272 per year.

With that kind of cash at stake, it’s important to be smart about how you plan to cover college costs. Here are a few points to consider.

Save More, Sooner The more you sock away and the earlier you start to do it, the better. Setting aside even a small amount each month will add up over time. A licensed professional can help you explore options like Section 529 college savings plans and Coverdell education savings accounts, which let funds grow tax-deferred with tax-free withdrawals to pay a beneficiary’s college costs.

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Did You Know?

$1,225 The average cost of books and supplies for the 2014–2015 school year at public colleges

Pay As You Go According to the College Board, parents and students covered more college bills from their current income in 2014–2015 than during the previous academic year. While paying with money you have now is a good thing, it’s important those funds didn’t come at the expense of contributions to retirement savings. After all, there are many ways to fund college, including scholarships, financial aid, student loans and work-study programs. But saving for the future is the only way to fund your retirement.

For the same reason, you’ll also want to resist any temptation to borrow against your 401(k) account. If you leave or lose your job, you’ll need to repay the loan in full or risk an early-withdrawal tax penalty. Plus, you may never be able to replace those funds.

Find Funding Fortunately, college funding sources abound. Help your child research grants, scholarships, tuition reductions, financial aid and work-study opportunities. Keep in mind that there are needs-based scholarships and merit-based scholarships. Among needs-based options, federal student aid is based solely on income and assets. Merit-based aid is available in a number of categories, from academic success to artistic ability, and the income level of the student’s family is not a factor. Your local high school’s guidance office can usually point you toward resources.

If you still feel the need to borrow to bridge a monetary gap, be smart about it. Shun high-interest borrowing sources, such as credit cards, at all costs. Lower-interest home equity loans or lines of credit are a better bet, although you’ll be taking on debt and putting your home on the line. Better still? Government-sponsored student loans that offer flexible repayment options, fixed interest rates and interest charges that start after graduation.

Tip
Allstate can help you set up a saving plan that suits your needs.
Securities offered by Personal Financial Representatives through Allstate Financial Services, LLC (LSA Securities in LA and PA). Registered Broker-Dealer. Member FINRA, SIPC. Main Office: 2920 South 84th Street, Lincoln, NE 68506. (877) 525-5727.