A parent's eternal question: How to pay for my child's education?

My first daughter won't be going to college for another 11 years, and I'm already feeling ill when I wonder how I'm going to pay for it. Not to mention my second daughter, who will be ready for college in 13 years.

So I'm always interested in learning about different ways to pay for college, and one such way that doesn't seem to be discussed that often is through college payment plans. These aren't loans but "pay as you go" plans.

It's kind of similar to the way you buy a house or a car. You make a payment every month for your kid's college education while they're in college. Given that tuition can run as high as $20,000 to $50,000 or more a year, nobody envisions payment plans as the only way you'd pay for college, but they can make up a shortfall, if you've exhausted your student loan possibilities and your 529 is as padded as possible and you have a student who has graduated from high school and rarin' to go.

I was told about payment plans by someone who works for Key Education Resources, a KeyCorp company, and naturally, the person was extremely enthusiastic. But then she works for this company, so I would expect that.

So I sought out the advice from a financial expert who seems to know his stuff (and mentioned in passing in a recent WalletPop post) and asked him about college payment plans.

But then our conversation wound up going off in several directions. So here's the takeaway from what Dan Danford of the Family Investment Center, a commission-free investment firm in St. Joseph, Missouri, had to say about college payment plans--and other forms of paying for your son or daughter's higher education.

College payment plans: Danford approves of them. "I'm for anything that helps a family and their students get a quality education," Danford said. "Most schools offer payment plans. Terms differ from school to school, but these are especially helpful to working students who 'pay as they go' instead of paying a lump sum in the beginning of each semester."

So if you're thinking of doing a college payment plan, it's not a bad way to go, the big benefit being that if you set up a program where you're paying a school $5,000 a year in a "pay as you go" plan, after four years, you've avoided paying interest on $20,000.

But, again, that's just one way to pay for college, and you're likely going to need several ways to pay for your child's education. As Danford says, most families will "go with a combination of need-based grants, student loans and cash payments."

Best way to pay for college: Still 529's, despite how the economy has played out lately. "Because of the tax-free growth and flexibility in choosing a school or program," says Danford.

Pre-paid tuition: Some parents have been opting for this--paying the tuition as your child grows up, so that you have college paid for, or much of it paid for, before your student even goes to college. Danford is all for this, provided "you're one of those rare families that absolutely knows where junior will attend school a decade from now."

That, of course, is the problem. You don't know what college your child will want to attend, so you're making the decision for them. It's the educational equivalent of setting up your baby in an arranged marriage. Still -- I'm not faulting a parent for taking this route and making sure their child's education is paid for.

Big name universities versus smaller names: Danford thinks its smarter, in most cases, to steer your teenager to the smaller, community colleges and public schools versus the ivy league universities, which is an argument that WalletPop regular Zac Bissonnette recently made in the Boston Globe.

As Danford explains, "Borrowing always makes sense if you can use that money to make more money. Doctors are the perfect example. Who wouldn't borrow $150,000 if it eventually qualifies you for a job paying $200,000 per year? Those 'massive student loan debts' take on a whole new perspective, don't they?"

Danford continues: "However, that argument is flawed because it applies to so few. Most careers don't offer salaries in that range, so the case is much murkier. You can earn a business degree or nursing diploma at an Ivy League school or the local community college. Salary in your early years will be pretty much the same after attending either one, so why borrow excessively for the Ivy League? I talk with young teachers who have little debt and others who have $30,000. Both are on the same pay scale at their district. It just doesn't make good sense to me. Many times, parents saddle their kids with student loan debt to satisfy their own ego needs for a prestige school."

Geoff Williams is a freelance journalist who has written for publications ranging from Consumer Reports to Entrepreneur Magazine. He is also the author of C.C. Pyle's Amazing Foot Race: The True Story of the 1928 Coast-to-Coast Run Across America (Rodale).
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