Room and Books As Your College Cost

Room and Board
The figure listed for “room and board” under a college’s list of tuition and fees may seem like a fixed, unavoidable cost, but there are things you can do to lower this amount.
1. Compare dormitory options. Does your child sign up for a more costly single room or another type of premium housing, or a lower-priced double, triple, or quad room?

2. Consider off-campus housing. In some situations, the cost of sharing an apartment near the campus is less than the price of a dormitory. The student can share use of a kitchen, which may also save some money. Be sure to include the total cost of off-campus housing in your calculation: rent,
utilities, and transportation to campus. At some schools, only
upperclassmen are permitted to move out of the dorms. And
in all cases, make sure the housing arrangement is in a safe
location and that the structure is properly maintained.

3. For students on campus, look carefully at available meal plans.
Is a twenty-one-meal-per-week meal plan necessary, or is your
child likely to sleep through a few breakfasts and skip a few
lunches or dinners each week?

Dormitory Furniture and Equipment
Allow me to sound like an old fogey for a moment: When I went off
to college in the late 1960s, I traveled a few hundred miles from my home
with two suitcases and a box containing my folk music record collection and

turntable. Forty years later I drove my daughter to school in a gigantic UHaul
truck with a few thousand pounds of her dearest possessions.

Like it or not, the essentials of a modern college dorm room now seem
to include (in addition to a bed, desk, and computer) a television set, VCR or
DVD player, personal refrigerator and microwave, coffeemaker, and enough
clothing to go weeks or months between trips to the laundromat.

Before the semester begins, roommates should get in
touch with each other by phone or e-mail to discuss what
they’re planning to bring to school and look for ways to avoid
expensive redundancy. Try to avoid having two microwaves,
two refrigerators, and competing televisions.

At many colleges, students can rent refrigerators, microwaves, or
a combination unit with both appliances from the bookstore or a private
company. There are some advantages and disadvantages here; the principal
advantage is that the unit is usually delivered at the start of the school year
and picked up at its end, removing that headache from the moving process.
And the rental company may offer a warranty or a replacement guarantee that
extends through the school year.


On the down side, the rental units are often as expensive, or even more
expensive than a new appliance purchased from a discount store. And then
you’ll have to do it again each year.
Compare the prices and look for ways to share purchases and storage
places with other students.

If you do need to buy electronics or appliances, you can usually
save a good deal of money and eliminate some of the hassle of
shipping by ordering online and having the items sent directly
to the student.




Books and Supplies
College-level textbooks can be outrageously expensive, with individual
titles sometimes costing $100 or more. (Publishers justify the price by
pointing to small print runs and short shelf life of some books. On the other
hand, some critics have pointed to cozy relationships between publishers and
professors, especially with teachers who are also authors.)
There are some things you can do to reduce the cost of books and
supplies:

Buy used editions whenever possible. Used copies usually sell
first; get to the college bookstore ahead of the crowd. This will
typically reduce costs by 25 to 50 percent.

Consider sharing books with a roommate or close friend.

Make a private deal with former students from a class to buy
their books at a price above the buyback price given by the
bookstore but below the resale sticker.

Whenever possible, order textbooks from lower-priced online
Web sites. Some books are available from major booksellers
such as Amazon.com or Alibris.com. Specialized textbook
Web sites include www.cheapesttextbooks.com, www.
campusbooks.com, and www.ecampus.com.

Follow the same strategy in buying art and photography
supplies and other necessary items. Look for places other
than the college bookstore, including office warehouse stores
and Web sites.
Read More: Room and Books As Your College Cost

A DOZEN WAYS TO CUT COLLEGE COSTS NOW

College is expensive. That’s a fact.
It is also true that there are many ways to reduce the
bottom-line price by thousands of dollars, tens of
thousands, and even more. There is, alas, no magic
wand; it takes hard work and sacrifice—by the parents (and grandparents and extended family in some cases), and by the student.

Here, then, are the core strategies for a family with a college-bound student:
1. Save early, often, and intelligently.
2. Aim for a scholarship.
3. Seek financial aid.
4. Learn how to borrow wisely.
5. Grab a do-it-yourself discount.
6. Take advantage of special programs.
7. Make the most of regional price variations.
8. Consider state colleges and community colleges, and
commuter enrollment or off-campus housing.
9. Consider foreign schools that offer substantially lower costs.
10. Choose a job that offers employee and legacy scholarships.
11. Put your child to work.
12. Spend less money after acceptance.

Save early, often, and intelligently.
The smartest thing you can do is to start putting aside money as soon
as your child is born. Every dollar put aside on that first day is going to
be worth about $4 eighteen years later; if it is invested in a plan in which
interest accumulates tax free, or withdrawals can be made without paying
tax—or both—the fund is going to be even more valuable.

Let’s just say you or your parents or other family members have $25,000
available on a child’s date of birth and can set it aside in a college fund; when
the first college bill arrives there will be something close to $100,000 ready

and waiting. (Where in the world will you get $25,000? Well . . . do you
really need a new car right now, or could you make do with a well-maintained
used machine for a few more years?)

However, I promised to be realistic: not everyone has that kind of
money sitting around unallocated. Chances are good that you’re a young
couple, new to the workplace. There’s a new baby, and there may be a down
payment on a house in your future. And even at a young age, you should be
making contributions to your retirement fund.

But you need to start putting money aside, even just $100 a month to
start. Think of that as $3.33 per day; that might mean cutting down your
intake of Grande Double Latte Half-and-Half from two to one a day.
Then keep on putting money aside on a regular basis, and look for
ways to double and then triple that amount. If you can put away $250 per
month—less than the equivalent of an extra car payment—for eighteen years
in a tax-free investment that earns a fairly conservative 7 percent, you will
have saved about $105,230 with relatively little pain.

The next part of the equation is to invest intelligently; it’s not as simple
as stashing money in a bank account. Later on, I’ll show you how to set aside
the most money with the least tax consequences, and I’ll tell you why it’s not
always advisable to put your child’s name on the account.

Aim for a scholarship.
Encourage your child to do good, and be good.
Nearly every college and university offers substantial grants to
incoming students with exceptional accomplishments in high school and in
the community. Some extra effort in studying, or a bit of tutoring can help a
student earn an academic scholarship.

You don’t need to be at the top of your high school class to win a special
scholarship based on your background, achievements, work experience, and
skills. A student who can present a great story of community volunteer work
and assistance to others can earn a citizenship award from a college.


Seek financial aid.
Need-based grants from federal, state, and private sources help lowincome
applicants pay for college. But you don’t need to be at the poverty
level to receive assistance; there are some programs that soften the bite of
interest on student loans. If you’ve got special circumstances or an unusual
financial story, contact the financial aid office and ask for reconsideration of
the financial aid offer.

And if you are caught in the middle class—earning too much for most
need-based programs and not quite rich enough not to care—there are some
things you can do to improve the parents’ or student’s chances of receiving certain
types of aid.

Learn how to borrow wisely.
If you need to take out a loan to pay for college, you’ll find out in Chapter
9 how to get the best available deals, including interest-free subsidized loans
and reduced-rate unsubsidized plans.

We’ll also explore tapping into the equity in your home—an easy source
of money in the proper circumstances, but not the best solution at every
point in the changing economic cycle. And even if you don’t need a loan, I’ll
show you how in certain situations it makes more sense to use someone else’s
money for a while.

Grab a do-it-yourself discount.
At most colleges, the standard tuition charge covers up to eighteen
credits per semester; most students take only five courses for fifteen credits.
If a student takes an extra course each semester, he or she will be eligible to
graduate midway through the senior year, saving about 12 percent of the cost
of a college degree—as much as $15,000 at a private school.

Another money-saving strategy: take Advanced Placement courses in
high school. If the student receives a high enough score on an independent
national test, colleges will grant credit; two AP course credits combined

with three extra courses over the first three years of college will also allow
graduation a semester early.

And don’t overlook taking summer courses at a community college.
Credits are almost always much less expensive there than at a four-year school,
and room and board—well, you’re paying for those already when the student
is home for the summer. You can read about these strategies in Chapter 15
and in the chapters from our roundtable of experts.

Take advantage of special programs
At many schools around the nation, there is the list price and the sale
price. In the next article, you’ll learn how a smart shopper can obtain discounts
for prepayment or for in-state attendance, and also how to enroll in prepaid
guaranteed tuition and other subsidized or special financing programs. In
addition, I’ll explain how many states offer grants or loan forgiveness to
students who enroll in certain courses of study and then promise to work in
that state for a period of time after graduation.

You’ll learn about the financial advantages of monthly payment plans,
and you’ll see how you can get a free vacation along with a college education
by earning frequent flyer miles on tuition payments.

Make the most of regional price variations.
You can shop for a college education at a high-priced school in the
Northeast or California, or you can buy a first-class education at a lower-cost
college in the South or Midwest. Our roundtable of experts will explain some
of the advantages in considering colleges in different parts of the country.

Consider state colleges and community
colleges, and commuter enrollment or
off-campus housing.
The best of state colleges and community colleges offer a quality
education without a name-brand price. One great strategy is to spend two
years at a community college or a state college and the last two at a prestigious
private school; your diploma will be from the private college or university.


We’ll discuss which public college systems offer the best education and
the best deals, and show where they may even make sense for out-of-state
residents. Living at home can save thousands on room and board. Off-campus
housing can offer a discount, too.

Consider foreign schools that offer
substantially lower costs.
You may be able to save tens of thousands of dollars by enrolling at a
quality school in Canada, Europe, and almost anywhere else in the world.

Choose a job that offers employee and legacy scholarships.
When a parent accepts a job, consider the value of all of the benefits
offered by the employer. Is there a college scholarship program from the
employer, a labor union, or an industry association? If your skills are of value to
a university, consider the value of free tuition programs offered to the children
of employees.

Put your child to work.
Students can earn thousands of dollars at summer and part-time jobs in
high school, and part-time and summer jobs after college begins. Before they
spend every dime on video games, Manolo Blahnik sandals, or a celebratory
trip to Europe, consider asking your child to put aside some money toward
college expenses.

Here’s one strategy: ask students to pay for their own walking-around
expenses. Do the math this way: There are roughly forty weeks in a college
academic year. If you and your child agree that $50 per week is enough, ask
that he or she put aside $2,000 for each of four years in college. If the child
would like an extra $20 per week, the response is: put away $800 more.
Put the money in a debit account and instruct the bank to dole out the
agreed-upon funds once a week. Not only does this take some pressure off the
parents, but it also helps the student understand that college is not free and
that their sacrifices have a benefit.

Spend less money after acceptance.
Consider the full cost of college, including transportation, books, school
supplies, and clothing. Then think about how to be a savvy shopper for each
of these costs. There are discount programs for bus and train tickets, online
sources for used books, discount Web sites for art and science supplies, and
many other ways to pay less for just about anything.

The college dorm may be convenient, but it may not be as cost-effective
as sharing an apartment. If you’re an entrepreneurial type, how about buying
an apartment or house near the college, collecting rent for four years, and
fixing up the place to sell when graduation time arrives?
Students have to eat, but not all board plans make sense; don’t pay
for twenty-one meals a week if your child skips breakfast every day.
Read More: A DOZEN WAYS TO CUT COLLEGE COSTS NOW

College Cost 101

101 According to Money magazine, total expenses for the academic year 2004–05 averaged $27,516 at private colleges and universities, and about $11,354 at public schools of higher education. As you read these words, prices are climbing—in recent times, about 6 to 8 percent per year. In 2006, about 14 million undergraduates will attend American schools of higher education; 80 percent will enroll at a public college.

There are a few things to keep in mind while those numbers bounce around in your head:

1. They may be too low. The top end of college prices are north of $40,000 per year.
2. They may be too high. There are many great deals at state colleges and smaller private colleges. Like it or not, only some 2,000 or so undergraduates are admitted to Harvard University each year, which makes the odds of getting in rather slim. And it is also true that not every student is suited for the most competitive, most demanding colleges; a student can get a great education at a state college or at a small private institution. 
3. The listed costs at private schools are the sticker prices. Some people walk into a car dealership and write out a check for the price listed on the sticker. Others do some comparison shopping among other dealers and other models and search out discounts and special programs. And some are willing or able to dig in their heels and bargain for a better deal. When it comes to college expenses, few if any schools are willing to haggle over the price of admission and room and board. However, there is usually quite a bit of latitude when it comes to the amount and type of grants, scholarships, loans, work-study jobs, and other assistance offered to parents and students. This is called the discount rate. In 2004–05 the average grant at private colleges was about $7,000; at public schools, it was about $6,200. Overall, about 76 percent of students at private colleges received some amount of financial aid (grants, scholarships, loans, and jobs); at public schools about 62 percent of those admitted received a financial package.
4. It is a fact that the vast middle class—with too much money to qualify for need-based grants and not enough money so that price does not matter—is hit hardest by college prices beyond the sticker price and the discount rate. However, there are dozens of ways to reduce the cost or lessen its impact on your personal finances.

BASIC FACTS ABOUT COLLEGE COSTS
The number of schools to choose from (more than 2,400 in the United States, plus hundreds if not thousands of international schools worthy of consideration) is daunting. The price can be frightening. And the process of taking tests, filling out applications, and writing essays can be overwhelming.
Here are some very important underlying principles to understand about college:
• The federal government and the colleges determine the amount of your financial need; you do not.
• Colleges are nearly immune from the ordinary rules of economics.

They are able to set their prices at will without much regard to things like the rate of inflation, interest costs, or the ability of many families to pay the bills. They can continue to do so for as long as there are those wealthy enough to pay full freight or there is enough federal aid to pay the costs for others. Those of us in the middle have to scrimp, save, and borrow—or go elsewhere.

• There are plenty of “elsewheres.”
• Don’t give up hope. There are dozens of ways to cut costs, increase the amount of financial aid, and otherwise obtain a first-class education at a discount price.

DOES IT PAY TO GO TO COLLEGE?
Every few years some supposed expert comes along and says that four years of time and money spent on college is a waste: just look at George Washington and Abraham Lincoln as historical examples . . . and Bill Gates and Michael Dell in the modern era. If you’ve got a special skill—be it high technology or marketing know-how, or musical, acting, or sports talent—why give up four years of prime earning power?

And there are some jobs that pay quite well and are in great demand but do not require academic training; have you hired a $100-per-hour plumber recently? It is also a fact that even today many college graduates are the first in their family to receive higher education.

All of this is true, but for the vast majority of students, going to college is the key to higher earnings and better jobs. In 2005, a study by the U.S. Census Bureau reported that those with a college degree earn, on average,
nearly double the amount of those without the diploma.

According to the census, workers eighteen and older with a bachelor’s degree earned an average of $51,206 a year, while those with a high school diploma earned $27,915. Workers with an advanced degree made an average of $74,602, and those without a high school diploma averaged $18,734.

Let’s assume that the average American works for about forty-two years between high school or college graduation and retirement; in fact, the number  of people working for that long is increasing, as more of us are staying in the work force out of necessity or because we are in better shape. The gap starts out relatively small, but by retirement age is quite wide; some experts say that over the course of a lifetime of work, the typical college graduate will earn as much as $1 million more than will a person with only a high school
diploma.

Other information in the Census Bureau’s Educational Attainment report showed that the American educational level in 2004 reached record highs: 85 percent of those age twenty-five or older said they had completed at least high school, and 28 percent said they had attained at least a bachelor’s degree.
Other highlights for the population twenty-five years and older in 2004:

• Minnesota, Montana, Wyoming, and Nebraska had the highest proportions of residents with at least a high school diploma, all at or near 91 percent.
• The District of Columbia’s population had the highest proportion with a bachelor’s degree or higher at 45.7 percent, followed by Massachusetts (36.7 percent), Colorado (35.5 percent), New Hampshire (35.4 percent), and Maryland (35.2 percent).
• The high school graduation rates for women was slightly ahead of that for men, 85.4 percent and 84.8 percent respectively. However, men had a higher proportion with a bachelor’s degree or higher (29.4 percent compared to 26.1 percent).
• Non-Hispanic whites had the highest proportion with a high school diploma or higher (90.0 percent), followed by Asians (86.8 percent), African-Americans (80.6 percent), and Hispanics (58.4 percent).
• Americans of Asian descent had the highest proportion with a bachelor’s degree or higher (49.4 percent), followed by non- Hispanic whites (30.6 percent), African-Americans (17.6 percent), and Hispanics (12.1 percent).

Other data in the survey showed that black and Asian women with bachelor’s degrees earn slightly more than similarly educated white women, and white men with four-year degrees make more than anyone else. Analysts said that there could be several reasons for the income difference, including the fact that employers in some fields may be offering special financial incentives to attract a more diverse work force; it might also be related to the field of study chosen by the graduates.

Data for the survey was collected in the Annual Social and Economic Supplement to the Current Population Survey (CPS); as with any survey, the results are subject to sampling variability and other sources of error.
So if your high school student offers to skip college if you’ll buy him a Porsche 911 Carrera coupe in seal gray with a cherry red interior, a 444-hp 3.6-liter engine, six-speed transmission, and a dashboard-mounted stopwatch for about $100,000 . . . suggest he hit the books and prepare for four years that should set him up to buy his own toys.
Read More: College Cost 101

How Much Does a College Education Cost?

Many adults overestimate the cost of college or believe that all schools are expensive. For example, a 1996 survey found that members of the public overestimated the tuition of both public two- and four-year colleges by two to three times the actual average tuition, a mistake of more than $3,000.
Although some colleges are expensive, costs vary from institution to institution. In addition, the availability of financial aid -- money available from various sources to help students pay for college -- can make even an expensive college affordable for a qualified student.

College Costs

The basic costs of college are tuition, fees, and other expenses:

Tuition

Tuition is the amount of money that colleges charge for instruction and for the use of some facilities, such as libraries. Tuition can range from a few hundred dollars per year to more than $30,000. The least costly option for postsecondary education is typically a local community college where the average tuition and fees are under $1,700 per year. There are also many four-year colleges and universities that are relatively inexpensive. For example, Chart 4 shows that a little more than half of the students who attend four-year colleges go to institutions that charge less than $4,000 in tuition and fees. This occurs because about 66 percent of the students who attend four-year colleges attend public institutions which have lower tuition rates than those of private institutions.

Fees

Fees are charges (usually small) that cover costs generally not associated with the student's course load, such as costs of some athletic activities, student activities, clubs, and special events.

Other Expenses

Besides tuition and fees, students at many colleges and universities pay for room, board, books, supplies, transportation, and other miscellaneous costs. "Room and board" refers to the cost of housing and food. Typical college costs are listed in Chart 5 below.

CHART 5 Typical College Costs
Tuition Fees Room Board	Books Supplies Transportation Miscellaneous Expenses

Tuition at Public and Private Colleges

Chart 6 shows the average tuition and fees by students at four different types of colleges in school year 1998-99.

Public Institutions

Over three-quarters of all students in two-and four-year colleges attend state or other public colleges. Because these schools receive a large proportion of their budgets from state or local government, they can charge students who live in that state (in-state students) relatively low tuition. Students from other states (out-of-state students) usually pay higher tuition rates.

In 1998-99, in-state students attending public four-year colleges faced an average tuition and fees of $3,243 per year. Resident students at public two-year colleges faced average tuition and fees of $1,633 per year in 1998-99. Tuition and fees for out-of-state students at four-year public institutions averaged $8,417 and $4,508 at two-year public institutions.

When the costs of room, board, books, supplies, transportation, and other personal expenses are added to tuition and fees, the average in-state total cost of attending a public four-year college was $10,458 in 1998-99. Since many students who attend two-year public schools live at home, the average total cost of attending a two-year public college in 1998-99 was $6,445. This includes the cost of tuition, fees, books, supplies, transportation, and other personal expenses for a commuter student.

Private Institutions

Private (sometimes called "independent") institutions charge the same tuition for both in-state and out-of-state students. Private college tuitions tend to be higher than those of public colleges because private schools receive less financial support from states and local governments.

Most private colleges are "non-profit." Other private postsecondary schools -- mostly vocational and trade schools -- are "proprietary." Such institutions are legally permitted to make a profit. Students at private colleges in 1998-99 faced an average tuition and fees of $14,508 per year at four-year colleges and $7,333 per year at two-year non-profit colleges.

When the costs of room, board, books, supplies, transportation, and other personal expenses are added to tuition and fees, the average total cost of attending a private four-year college was $22,533. If these same kinds of costs are added to the tuition and fees of a two-year private college, the average total cost of attending such a school was $14,222.

Future College Costs

By the time your child is ready to attend college, the tuition, fees, and costs of room, board, and other expenses will be larger than the amounts discussed in this handbook. Because there are many factors that affect the costs of a college education, it is impossible to know exactly how much colleges will charge when your child is ready to enroll. Be cautious when people tell you a particular amount; no one can be sure how much costs will change over time. In addition, as college costs increase, the amount of money you earn, and thus the amount you will have available to pay for college, will also rise. The U.S. Department of Education

529 & Other College Saving Plans

Click HereSection 529 plans seem to be wrapped in qualification after qualification, but don't allow these endless lists of criteria discourage you from using 529 plans. Instead, check out how I break down those lists of qualifications so that you can easily identify whether your plan, your student, and your student's expenses meet the myriad criteria associated with 529 plans.

Funding For The Professional Student

You may have already investigated one or more Section 529 plans and discovered the dollar limitation that is built into each state's plan. The limits are very high, especially for the Section 529 savings plans (which can reach toward $300,000 in a single plan, depending on what state's plan you use). But if your designated beneficiary is headed for great things " such as years of graduate or professional education beyond a bachelor's degree " the limits built into a single state's Section 529 plan may not be enough to cover your costs.

If you suspect that perhaps your son or daughter is heading for medical or law school after college and nothing but an Ivy League school will do, you can fund Section 529 plans in more than one state, even if your total contributions across all plans, regardless of state, equal more than the limit for any single state. Remember, the wording in Section 529 is specifically vague, and the limits are imposed at the state level, not the federal. So long as you do not fund plans in excess of what your designated beneficiary will use during his or her postsecondary education, having more than one plan in more than one state is perfectly okay.

When you make a contribution to a Section 529 plan, you're not allowed any federal income tax deduction for the amount of your contribution (unlike many sorts of retirement plans, which defer income tax not only on the accrued earnings in the account but also on your contributions). Depending on what state you live in (and if you use its plan), you may get a current state income tax deduction for part or all of your contribution each year.


After your money is safely tied up in a Section 529 plan, interest that you earn on it isn't taxed until distributions (amounts of money you take out of the plan to pay your student's expenses) are made to your designated beneficiary. And, if you use distributions from these plans to pay the qualified education expenses of a student at an eligible educational institution (these are the IRS's words, not mine), accrued earnings generally aren't taxed at all.

In other words, a Section 529 plan allows you to save for college, and it exempts or defers income tax on the accrued earnings until the designated beneficiary begins taking distributions from the plan.
At this point, you may be thinking that the only educational institutions that these plans are qualified to pay for are colleges and universities. Not true. Qualified institutions include all postsecondary schools that are eligible to participate in U.S. Department of Education financial aid programs, including many vocational and technical schools, community colleges, and even some apprenticeship programs. Eligible institutions don't need to be located in the United States; many foreign colleges and universities qualify. The standard here is that the schools must be eligible; they don't actually have to participate in these financial aid programs. Check with the institutions you or your student are interested in to be sure that they qualify.

Making Sure Your Plan Qualifies

In order for a Section 529 plan to qualify under the IRS's rules, it must meet the following criteria:

• Contributions may be made only in cash, including checks, money orders, or payroll deductions, but not in stocks, bonds, or real estate.
• After a contribution is made into a specific plan, you may not direct the investments. You may, however, change plans once each year.
• You may not pledge the value of the account as security against any sort of loan.
• The plan or program in which you invest must provide each designated beneficiary a separate accounting.
• You can't contribute more into an account, or group of accounts, for the benefit of a single designated beneficiary than the beneficiary will use in the payment of qualified higher education expenses. You have to try to estimate this amount.

Making Sure Your Student Qualifies

Strangely enough, the things you think of when the phrase "qualified student" comes to mind (grades, commitment, drive, and so on) have absolutely nothing to do with the IRS's definition. For the purpose of Section 529 plans, a qualified student must meet the following criteria:

• He or she needs to be the original designated beneficiary of the plan or, in the case of a tax-free plan rollover to another beneficiary, must be a member of the same family as the original beneficiary in one of these listed relationships:
• Spouse
• Child, grandchild, or great-grandchild (a lineal descendent)
• Stepchild, stepmother, or stepfather (but no stepgrandchildren)
• Brother, sister, stepbrother, or stepsister
• Father, mother, or grandparents (a lineal ancestor)
• Niece or nephew
• Brother or sister of your mother or father
• First cousin
• An in-law, either mother, father, sister, brother, son, or daughter
• Husband or wife of any person on this list
• He or she must actually be an enrolled student at a qualified educational institution.

Making Sure Expenses Qualify

When I went to college, a fancy car, a nice apartment, and spring breaks in exotic locations were part of the package for many of my classmates. (My package included public transportation, shoe leather, university housing, and vacations in lovely downtown Baltimore " watching traffic going to the Orioles games was very exciting!) Of course, this was before the days of any qualified tuition plans, let alone Section 529 plans, so the question of what was a qualified expense and what wasn't never entered the discussion. It was more a question of what your parents could afford and were willing to spend.

Things have changed a little in the intervening years. Now, although all the extra perks are still the norm for many students, parents (and other relatives) who fund Section 529 plans need to be very conscious of what constitutes a qualified higher education expense and what doesn't. (Trips to Cancun, unless part of your child's specific university program, and a sports car won't make the grade.) Table 5-1 lists qualifying higher education expenses.

Distributions from 529 plans that pay for nonqualifying expenses will qualify for income tax on the earnings portion (not on the amount of your contribution into the plan). Your student will also pay an additional 10 percent tax on the income, otherwise known as a penalty, unless she qualifies for an exception (see the section "Exceptions to tax-free distribution rules").

Type of Fee	Full-Time Student at an Eligible Institution	Part-Time Student at an Eligible Institution
Tuition	Yes	Yes
Room and board (paid directly to educational institutions)	Yes	If enrolled half time or more, yes; otherwise, no
Room and board (paid directly to other landlord and grocery store)	Yes, to extent allowed by budget amount set by school	If enrolled half time or more, yes, to extent allowed by budget amount set by school; otherwise, no
Fees (as required by the institution)	Yes	Yes
Books, supplies, and equipment *Computers are accorded special treatment effective 2009-2010. All other school supplies must be required by the school to be eligible.	Yes, to extent allowed by budget amount set by school	Yes, to extent allowed by budget amount set by school
Expenses of a special-needs beneficiary necessary for enrollment at an eligible institution	Yes (regulations defining qualifying expenses are still pending)	Yes (regulations defining qualifying expenses are still pending)

Table 5-1:  Qualified Higher Education Expenses for 529 Plans

All eligible schools are now required to provide you not only with the price of what you will pay them directly (tuition, fees, and often room and board) but also the total cost of what they expect an academic year to cost. This is called the budget, or the total cost of attendance, and includes tuition, fees, room and board, books, supplies, insurance, transportation, and miscellaneous items. Remember, even though the total budget amount may be higher, only the expenses in Table 5-1 are qualified for payment from a Section 529 plan.

Qualified Expense Limitations

The amount of qualified expenses you may be able to use Section 529 plan distributions to pay for are limited if you fall into any of these categories:

• If your qualifying student receives tax-free educational assistance (outright grants and scholarships), the amount of expenses that would otherwise qualify will be reduced by the amount of the tax-free aid.
• If your qualifying student is also the beneficiary of a Coverdell Education Savings Account and receives distributions from that plan, all qualified expenses need to be divided proportionately between the two plans. You can't double dip, or take the full amount of qualifying expenses from each plan.
• If you want to take the Hope and/or Lifetime Learning Credits on your income tax return, you need to use taxable income to pay for at least a portion of your student's qualifying expenses.

Exceptions To Tax-Free Distribution Rules

Beginning in 2002 and currently scheduled to end after December 31, 2010 (the "sunset provision"), distributions made from Section 529 plans for payment of qualifying educational expenses are free from federal income tax (state income tax rules may differ " check with your state). The federal government has found an effective way to provide incentives for you to send your children to college; however, it has also built in many safeguards to make certain that you don't abuse its kindness.

When taxable distributions do occur, the federal income tax is paid by the designated beneficiary, not by the contributor(s) to the plan (rules regarding state income tax vary by state). Often, the rules aren't clear, even to the IRS, or your situation may be ambiguous. Don't hesitate to seek advice here.
The following are instances where the designated beneficiary may be required to pay a federal income tax on distributions from a Section 529 plan:

• Using plan distributions to pay nonqualifying expenses: If the designated beneficiary takes a distribution but doesn't use it to pay qualified expenses, he or she is basically out of luck. The accrued earnings on that distribution will be taxed at normal income tax rates, plus an additional 10 percent for trying to pull the wool over the government's eyes. The news here is not all bad, though; if only a part of the distribution is used to pay nonqualified expenses, the entire distribution isn't tainted. Only the earnings on the portion that didn't pay qualified expenses will be taxed.
• Terminating a plan, because the designated beneficiary chose not to continue his or her education or because some money is still left in the plan after completing that education: When a plan is terminated (rather than rolled over into another plan or beneficiary), the earned income that's distributed, whether to the designated beneficiary or the plan owner, along with the original contribution amounts is taxable. In addition, it's subject to the 10 percent additional penalty. Likewise, if the plan contains more cash than the designated beneficiary will use for qualified higher education expenses, the income portion of that excess distribution is taxable, and the 10 percent additional tax applies.
• Taking plan distributions from an institutional plan before January 1, 2004: If you set up a plan with a specific college or university or a consortium of colleges and your designated beneficiary begins to take distributions before January 1, 2004, for qualified expenses, he or she will have to pay the income tax on the accrued earnings, but not the additional 10 percent. Unfortunately, the tax-exempt distribution rules for institutionally administered plans don't come into play until January 1, 2004; fortunately, because institutional plans only came into being in concept in 2002 and in actuality in 2003, not too many people should be affected.
• Distributing funds on account of the death of the designated beneficiary: If you need to distribute funds to a beneficiary's estate or to someone other than the designated beneficiary of the plan, due to the death of that beneficiary, the earned income portion of the distribution is taxable; however, no additional 10 percent tax is assessed.
• Making distributions due to the long-term disability or impending death of the designated beneficiary: In much the same way as insurance companies can now prepay life insurance policies to terminally ill patients without any adverse tax consequences, the IRS now allows distributions from Section 529 plans to be made to terminally ill beneficiaries and to beneficiaries with a long-term and indefinite disability. The earned income portion of these distributions is taxable, but no 10 percent additional tax is assessed. You do need to provide the IRS with a doctor's note to qualify for this exemption.
• Using the Hope or Lifetime Learning Credits: To the extent that you use certain qualified educational expenses to qualify for the Hope and Lifetime Learning Credits, those expenses will no longer qualify for tax-free treatment, even if you paid for them from your Section 529. The earnings portion will be taxed, with no additional 10 percent tax; again, no double dipping is allowed.
• Receiving education benefits that are excludable from gross income: If you're fortunate enough to receive qualified scholarships, veteran's assistance, funds from employer tuition-reimbursement plans, or other tax-free benefits (excluding gifts, bequests, or inheritances), the earnings on Section 529 plan distributions are taxable only if the amount of the 529 plan distribution is less than or equal to the amount of other tax-free educational assistance. There is no 10 percent additional tax. For example, if your student's qualified expenses equal $20,000, he receives a $20,000 tax-free scholarship, and you make a $20,000 distribution to him from his Section 529 plan, he will pay income tax on the earnings portion of the 529 plan distribution, but no penalty, even though none of the distribution is being used to pay qualified educational expenses. From the IRS's standpoint, it's enough that it would have been used for that purpose if your student hadn't received the scholarship.

Understanding the cost of study aboard

Click HereThinking about how much your experience abroad is going to cost you (and your parents) relative to what you pay per semester or per year at your home university is important. Basically, studying abroad can cost you more, less, or the same as studying at home. The bottom-line cost depends on a variety of factors that may or may not be within your control. For example, you can control how many times you eat out or cook in while abroad, but you cannot control things like your home university's tuition policies, whether your financial aid is transferable, costs of living in another country, tuition at an overseas school, or international currency exchange rates.

Looking at the major expenses

Study abroad programs package major costs in various ways. Some may include tuition, housing, meals, airfare, insurance, and other program-related expenses in one all-inclusive fee. Others may include some but not all of these items. Collecting all the information and trying to come up with complete figures so you can arrive at the bottom line of what studying abroad will cost you is entirely your responsibility. And you need these calculations so you know whether you can afford a particular study abroad program. Never be afraid to make phone calls or send e-mails asking about what something costs.
Be aware that program costs frequently change because of varying exchange rates and changes in the types of services provided for the program fee. As a result, the cost listed in last year's catalog or study abroad guide may no longer be accurate!
The following variables often affect the overall cost of your study abroad experience:

• Location, location, location: In general, living in a big, bustling, cosmopolitan city is probably going to cost you more than living in a quiet countryside location. When the U.S. dollar is weak in comparison to a local currency (say for example, the British pound), then the cost of living is going to be higher. Conversely, when the U.S. dollar is stronger than the local currency, the cost of living will be lower — that is for U.S. students studying abroad. Additionally, the cost of your study abroad program depends on which part of the world you choose to study in. Programs in Western Europe tend to be more expensive than those in most other parts of the world (Canada, Africa, Asia, or South America). But take note that it is not unheard of for programs to be expensive in countries with lower costs of living.
• The length of your stay: This factor, although obvious, is important: The longer the program, the more money you're going to pay. If you're away for a full year and fly home for vacations or holidays, that means paying for more than one airfare to and from your destination at the beginning and end of a semester. However, be aware that costs can fluctuate based on the time of year you happen to be studying abroad. For example, the per-week/per-credit cost of a summer program may be greater than the per-week/per-credit costs of a semester program.
• Your class load: You may pay tuition at your home university on what is called a semester basis, which means everyone pays the same tuition for the semester regardless of how many or what type of classes you take. Realize that outside of the U.S., many universities determine tuition based on a per-credit basis. Taking five classes can cost more than taking four, and taking science courses with laboratory components can cost more than taking an English class.
• The program you choose: Study abroad programs offered by private colleges or organizations (such as the Counsel for International Education Exchange — CIEE) cost more than programs sponsored by public institutions. A great way to reduce costs is to go abroad through the public university of the state in which you're a resident because paying the reduced in-state tuition may be less expensive. Shop around. Some destination cities and countries are more popular than others; therefore, any number of universities may offer study abroad programs in a given location, which means that prices will vary.
  
• The services offered: The type of program in which you plan to study also determines cost. When you choose go with an island program (See Chapter 5 for an explanation) that caters to groups of U.S. students, the costs typically are more than directly enrolling at an abroad university. For more money, you're getting more services, such as program staff support in the country you're studying in, language training or orientation programs, social activities, and sightseeing trips.
• Hidden expenses: In addition to your program fee, you may find yourself paying a number of other hidden expenses. A few to watch out for and put into your budget/overall cost scheme (again, see Chapter 14 for more detail) are application fees, extracurricular fees (in other words sports center access), housing deposits, room and board for vacation periods, passport fees, student I.D. fees, commuting costs, insurance (health, accident, traveler's, renter's), phone calls home, laundry, luggage, and weather appropriate clothing.

Understanding home-university tuition policies

Your home university's tuition policy is probably the single most influential factor that determines how much you pay for your study abroad experience. What your home university's policy is regarding fees to study abroad also determines whether your financial aid transfers.

When you receive financial aid to help pay for schooling and you've applied to go abroad (or you're at least considering it), you need to meet with your financial aid officer or study abroad adviser at your home university to start figuring out how you can pay for your abroad experience. Bring a proposed study abroad budget with you to this meeting. Preemptively taking this step is a good idea because you'll probably have to submit one to the financial aid office eventually anyway. (For more help with study abroad budgeting, see Chapter 16.) Be sure to ask what funds can and can't be applied to a study abroad program. Each home university has different rules and quirks about financial aid and going abroad, and although I try to cover some of these here, your financial aid office is the better authority on this situation. Financial aid representatives can advise you what your particular situation is — based on the amount of aid you're receiving and where you intend to study — and then adjust your financial aid package accordingly.
Because many foreign universities are state supported, the cost of tuition is much lower than what is charged at many U.S. schools, particularly private colleges and universities in the U.S. Conversely, some foreign universities have different levels of tuition and charge higher tuition fees to foreign students. For example, Trinity College, where I studied in Dublin, Ireland, charged its lowest tuition rate for Irish students, a middle-level tuition rate for European Union nationals, and its highest tuition rate for non-E.U. students. Yeah, they apparently believe Americans are made of money!
The following is a list of possible study abroad tuition and financial aid scenarios, from the simplest to the most complicated.

Taking advantage of your home university's program

You're going on a home-university sponsored study abroad program. Tuition is the same regardless of whether you're studying with your home university in another country or in the U.S. If you're currently receiving financial aid, then it's highly unlikely that anything needs to be done differently than in any other semesters you've been at school. You and your parents fill out an endless pile of forms, send them to the appropriate places, and your school gets the correct amount of funds. Just make sure that you budget for things you don't normally pay for when you're staying in the U.S. Airfare may be one such item; groceries are another (if you're on a meal plan at school and don't usually cook for yourself).

Traveling through a different university

You choose to go on a study abroad program sponsored by another U.S. school. Your home university requires you to pay full home-university tuition, and through a written agreement between it and your abroad U.S.-based program, you're allowed to use your financial aid. Policies on whether you're entitled to your financial aid vary, and you need to double-check this with your study abroad or financial aid office.

Getting stuck paying excess tuition

You choose a program sponsored by your home university or another U.S. university, and you're required to pay full home-university tuition even though the tuition at the school you'll be attending is much lower. The U.S. schools tend to justify this in one of the following ways:

• You're paying not only for school credits you earn through the home university but also study abroad advising and other administrative and support services. While studying abroad, you accumulate credit toward the degree you receive from your home university. When that's the case, it is hoped that the courses and grades appear on your transcript just as if you were at your home university for a year.
• While you're away, the home university cannot really fill your space, for a number of reasons, one of which is that the university budget assumes a certain number of students attend school for four years, and the budget doesn't work whenever a certain percentage of the student body is away on leave.
• The principle of equality of opportunity for abroad studies to be accessible to all students means that your home university needs to be able to provide financial aid. Thus, it needs to rely on certain tuition revenues, especially when it provides an extensive amount of institutional financial aid.

You may be irritated knowing that your inexpensive study abroad program is actually subsidizing other people's pricey abroad experiences. Think of it this way: Classes in humanities and social sciences, which cost less to administer and often have larger enrollments, can be thought of as subsidizing classes in fine arts and sciences, which are more expensive to run. When your school doesn't charge different fees for these different types of classes, then it can justifiably make the argument for charging the higher home-university tuition.

If your abroad program only charges you tuition and expects you to arrange your own room and board, make sure that you're billed only for home-university tuition.
Whenever you're paying home-university tuition, you are more than likely responsible for airfare and other nontuition charges. An exception would be if your abroad program offers some sort of group airfare as part of its comprehensive fee.

Taking a leave of absence

Yep, you guessed it. Taking a leave of absence can get a little bit tricky, but you may be able to take advantage of lower-cost tuition at foreign universities. Some universities will approve your study abroad plans and transfer your abroad credit if you decide to go abroad through a U.S.-sponsored program or direct enrollment at a foreign university; however, doing so requires you to take a leave of absence. Technically that means you're not a student at your home university for the duration of your abroad program, regardless of whether it lasts a semester or a year.

Unfortunately, taking a leave of absence is likely to change your financial aid and funding status. You won't be allowed to take your institutional aid with you, and you may need to seek other scholarship or grant opportunities through your U.S.-sponsored program or foreign university. When you're going with a U.S. program, you can adjust your federal and state aid accordingly, but if you're directly enrolling at a foreign university, the general rule (at this point, anyway) is that you cannot take federal or state financial aid with you. Thus you're going to have to look for other ways of funding your abroad experience. Check out the list of additional resources in the "Utilizing Other Resources for Finding Money" section at the end of this chapter to jump-start your search.

If your home university requires or recommends taking a leave of absence, you should discuss all the ramifications of this with your study abroad adviser. Not only do leaves of absence cause credit issues with your home university, but they can also cause financial problems. If you take a leave of absence because you are not officially enrolled at your home university, financial lenders may demand repayment on student loans!
Ah yes, but hope for the federal government doth spring eternal. Some recent developments in how financial aid is administered have proven beneficial for students wanting to study abroad. Stafford loans now are made available to U.S. students studying in Canada. See the section, "Looking at the legalities of funding," later in this chapter for more on using federal aid to study abroad.

For you to be able to study abroad, as many as five different groups of people or organizations can become involved in getting your financial aid straightened out. (They should award parents with special degrees in filling out more and more (and more) financial aid forms.) If you're already receiving financial aid (see the next section), you're familiar with three of them: you and your parents, your home-university financial aid office, and whatever organization/bank/educational-funding agency is loaning or giving you the money. When you throw an abroad university into the mix, the number of players climbs to four. That is a great deal of coordinating to accomplish, and ultimately, you're the one responsible for making sure that the money gets where it needs to go. Erin E. Sullivan

Parent Guide : Cutting Budget

What do you do if the government's Expected Family Contribution is just too high or you can't manage the unmet need in your financial aid package? This page provides a few tips on finding the necessary resources.

Professional Judgment

Your first step should be to talk to the financial aid office at the school. Ask for a professional judgment review and tell them about anything unusual about your family finances and anything that has changed since last year. Sometimes the school can make adjustments that will result in more financial aid.

Ask Relatives for Help

Asking relatives for money is never easy, but it is easier when you are asking for help with a worthwhile cause like your children's college education. Their grandparents may be interested in helping because your children are their legacy. 

Relatives can pay the money directly to the college without incurring any gift taxes. (A payment for the education of a designated individual is not a charitable contribution and cannot be deducted on their income taxes.) Be sure to ask the school whether this will affect the student's need-based aid eligibility. If the school will be treating it as a payment on the student's account, it will generally have no impact on aid eligibility. But if the school treats it as a resource, it will reduce aid dollar-for-dollar. 

There are other ways your relatives can help that will not have an impact on the student's financial aid package:

• If the grandparents set up a Section 529 College Savings Plan (or a prepaid tuition plan after July 1, 2006) where they are the account owners and the student is the beneficiary, it will not be reported on the FAFSA as an asset. Qualified tuition plans like these are only reported on the FAFSA when either the parents or the student are the account owners. (Some private colleges, however, will count all such plans as assets for awarding their own financial aid.) Distributions from qualified tuition plans are also not counted as income. 
• If the grandparents pay the money to the parents, instead of the student, it will have no impact on aid eligibility. Gifts to the student are reported on Worksheet B of the FAFSA. Gifts to the parents of a dependent student, however, are not reported on the FAFSA due to a quirk in the definition of untaxed income and benefits. (Section 480(b)(7) of the Higher Education Act defines untaxed income and benefits as "cash support or any money paid on the student's behalf, except, for dependent students, funds provided by the student's parents". Since this definition is limited to money paid to or on behalf of the student, gifts to the student's parents are excluded.)
• A gift to the student after the student graduates will not affect need-based aid, so long as it is not a completed gift until after the student graduates. (Trust funds, on the other hand, are counted as a student asset and will severely impact aid eligibility.)

Borrow the Money

Education debt is good debt, in that it is an investment in the student's future. Just be careful to avoid borrowing more than you can afford to repay. 

There are many options available for borrowing money to pay for your children's education. We are listing them in order from least to most expensive.

• The Perkins and subsidized Stafford loans have the lowest interest rates and the government pays the interest while the student is enrolled at least half time. But the loan limits are low, so this may not cover the full cost of education.
• If there is additional Stafford Loan eligibility, you can borrow it as an unsubsidized Stafford Loan.
• The PLUS loan is a parent loan that allows you to borrow up to the full cost of attendance, minus any aid received. But this is a parent obligation.
• Home equity loans and lines of credit may be an option for some families. They are available as either fixed rate loans or variable rate loans. Again, these are parent obligations.
• Private education loans have a variety of terms. They are generally based on credit with terms that are pegged to your credit score. These are student obligations, but often the parent must cosign the loan.

You can also make the federal education loans more affordable by consolidating them, which makes a variety of alternate repayment terms available. These include extended repayment, graduated repayment, and income contingent repayment. These can cut the size of the monthly payment significantly (by as much as half), at a cost of increasing the term of the loan and the total interest paid over the lifetime of the loan.

Cut your Budget

FinAid has two budget calculators that can help you manage your budget.

• The student budget calculator calculates the difference between education expenses and income, identifying when you are spending beyond your means.
• The family budget analyzer compares your expenses against regional and national norms, helping you see where you are spending more than most other families. This can help you identify budget categories where there are opportunities for saving by cutting expenses.

Some of the most common budget areas where savings is possible include:

• Meals & Entertainment
• Scale back or eliminate the family vacation. Travel and lodging costs are often the most expensive component of the family vacation, so consider staying local to cut costs.
• Cut back on eating out. Eating in is often much less expensive than dining in restaurants. Homemade coffee is much less expensive than trendy coffee shop lattes.
• Reduce other entertainment spending, such as cable/satellite TV, movies and spectator sports. Borrow books and movies from the library instead.
• Substitute free events and less expensive alternatives for paid entertainment. Walking, jogging and biking are not only free, but healthy too. Matinee movies and DVDs are often less expensive than first run shows. Eat fruit instead of candy and fast food, especially if you buy food at the grocery store and brown bag meals instead of raiding vending machines.

• Transportation
• Avoid replacing an older vehicle, or get rid of an unnecessary car. You will not only save on car and fuel costs, but also on auto insurance. Also consider replacing more expensive cars with less expensive cars and less fuel efficient cars (SUVs, Trucks) with more fuel efficient cars (compact cars, hybrids). Change your engine oil and filter as per the manufacturer's recommended schedule and maintain proper tire air pressure.
• Use public transportation to save on gas and to make your commute more productive.
• Buy gas at the lowest octane level for your car. Higher octane fuel does not improve performance and adds to your fuel costs. Also keep your car's tires properly inflated.
• Shopping around for auto insurance can save you hundreds of dollars for identical coverage. Increase the deductible on the collision and comprehensive coverage for your car.
• When shopping for air travel, compare the airfares available at low-cost carriers and at all nearby airports. Also check whether an advance purchase ticket with a Saturday night stay saves money. Be flexible on your travel days. 

• Home
• If you pay someone to mow your loan or a housekeeper to clean for you, doing the work yourself can save hundreds or thousands of dollars a year. It is also a good source of exercise.
• Install a setback thermostat to reduce heating and cooling costs. Turning down the heat a few degrees and minimizing use of air conditioning can save as much as 15% of the annual heating and cooling bill. Sweaters and blankets are cheaper than gas and electricity. Weatherstripping the doors and windows and adding insulation to the attic can save money and make your home more comfortable. Turn down the thermostat on your hot water heater and insulate it. (Ask your local utilities if they offer a free home energy audit program.)
• Replace incandescent light bulbs with compact fluorescent bulbs. Turn off your computer and monitor when not in use to save about $100 per year. Use the Power Options control panel to automatically turn off the monitor after 15 minutes.
• Unplug A/C adapters that aren't in use (or plug them into a multiple outlet strip and turn that off). Many adapters continue to draw current even when not connected to a device.
• If home values have decreased because of the economy, appeal your home's appraisal to get a reduction on your property taxes. 

• Finances and Insurance
• Pay off and cut up your credit cards, instead of carrying a balance. If you carry a balance, you are living beyond your means. Pay off the credit card bill in full at the end of the month to save on interest. Reducing your high interest debt will put more money in your pocket, instead of the bank's. Target the most expensive debt (highest interest rate) for elimination first. Paying all your debt installments on time can cut your financing costs by improving your credit score, as some interest rates are based on your FICO score.
• Use cash to pay for your purchases. Using a credit card feels the same whether you're spending $5 or $500. The psychological weight of pulling more money from your wallet may make you hesitate a bit before wasteful spending. It can also help if you change small bills into bigger bills, since you're less likely to break a $20 or $50 bill for an impulse purchase.
• Shop around for a free checking account with no ATM and debit card fees. Often direct depositing your paycheck can yield a fee waiver.
• Pay your credit card bills electronically via the card issuer's web site. This not only saves on postage, but can help avoid late payment fees.
• Refinance a high interest home mortgage at a lower fixed rate, to save on your monthly mortgage payments. If you've built up 20% equity in your home, ask your lender about eliminating the Private Mortgage Insurance (PMI).
• Cut insurance costs by increasing the deductible on your insurance policies and installing dead-bolt locks on your doors.
• Check whether your auto insurance policy and credit card issuer whether they cover rental cars. If they do, turn down the rental car company insurance the next time you rent a car.
• Reduce your charitable contributions. Although helping others is important, it is also important to address your own needs first.
• For "pure" life insurance, get a term life insurance policy. Cash value policies like whole life are often an ineffective investment vehicle.
• Homeowner insurance should be based on replacement cost (e.g., cost to rebuild the home). Many insurers automatically adjust the insurance coverage for inflation. If it's been several years since you got the insurance policy, ask the insurer to reevaluate the coverage to ensure that you have the right amount of coverage.
• Pay yourself first. Set up an automatic transfer of at least 10% of your paycheck from your checking account to a savings account. If the money isn't in your checking account, you are less likely to spend it.
• Drop all of your spare change in a jar or tin can (or piggy bank) at the end of each day, and periodically deposit the funds in a savings account. Keep the spare change jar on your dresser. 

• Shopping
• Eat before doing your grocery shopping. You buy more when you're hungry, leading to wasted food. Also do your grocery shopping less frequently, reducing the opportunities for impulse buys. Using a shopping list can also help avoid impulse buys. Use coupons when you shop. Buy non-perishable items in bulk when they are on sale.
• Ask your pharmacist about lower cost generic drugs. Also consider lower cost mail order pharmacies.
• Shop around for major expenses, such as home repairs, car and homeowner's insurance, long distance telephone service and mortgages. Check the Consumer Reports ratings. Wait until the item goes on sale before you buy.
• Establish a mandatory two-day waiting period before making any major purchases to help avoid impulse buys.
• Buy used but quality products at garage sales and online. Use web search engines to comparison shop on major purchases. Buy sensible clothes instead of the popular brand names that are continually going out of style.
• Buy used textbooks at half price and sell them back to the bookstore at the end of the semester.
• Work weekends not only to earn extra money, but to have less time available for shopping.
• When you are about to purchase a major appliance in a store, ask for a 10% discount. Most store managers have the authority to give a discount of up to 10% on a major purchase. 

• Vices
• Reduce spending on the lottery or other forms of gambling.
• Giving up coffee, tobacco, alcohol, candy and soda can save thousands of dollars per year, and also improve your health. 

source : finaid.org

Cutting College Costs

College costs are going through the roof. The average debt of a student finishing college is almost $20,000! Follow these strategies to reduce the sticker cost of your education.

Tip 1: Ask about application fee waivers and special discounts

The cost of applying to college, taking standardized test scores and having those scores sent can really add up. If you're strapped for cash, consider asking about application fee waivers. But keep in mind: Availability is limited, and you must meet some pretty stringent standards to qualify.

Some schools offer special discounts for legacies (children of alumni), when more than one member of the same family is enrolled at the same time, or for children of employees.

Tip 2: Apply for financial aid

Even if you think you're not eligible, be sure to apply for financial aid by filling out the FAFSA (Free Application for Federal Student Aid). This form is the first step for applying for all kinds of aid, from federal aid (grants, loans and work-study), to state-based funding (grants and other programs), to college-based aid (special awards, grants and work-study programs). And who knows, you just might qualify! [This tip is for US citizens only; International students should visit EduPASS.]

Tip 3: Search for free money

And since every little big counts, you should also apply for scholarships. Use the FastWeb.com scholarship search to help you find awards and then apply!

Tip 4: Complete some of your credits at a lower-cost school

You can save a lot by completing your general education requirements at a community college, state university, or less expensive school and then transferring to complete the degree. A less competitive school may offer merit aid to attract talented students. For in-state students, public colleges cost about half of private colleges when one includes all costs. Community colleges cost even less. (Of course, the more expensive colleges provide more financial aid to compensate for the higher cost, but if you don't qualify for financial aid, a community college can be a much less expensive way of getting a college education.) 

Talk to an admissions counselor to be sure your credits will transfer, and learn as much as you can about the financial aid policy. Some schools restrict financial aid for transfer students, or may only have financial aid for students who transfer at the beginning of the academic year. 

There are, however, risks in starting off at a 2-year college with a goal of transfering to a 4-year college. Students who start off at a 4-year college are more likely to attain a bachelor's degree and to graduate sooner than students who start off at a 2-year college. Similar results hold true for the choice between a 4-year public college and a 4-year private non-profit college. A paper by Bridget Terry Long and Michal Kurlaender of the National Bureau for Ecomonic Research (NBER 14367) showed that students who start at a 2-year college are 14.5% less likely to complete a bachelor's degree than students who start at a 4-year college. 

Tip 5: Get to know the financial aid administrator at your college

While specific rules apply for financial aid calculations, financial aid administrators still have a certain amount of leeway in determining how aid is allotted. It's important to let your financial aid officer know about any special circumstances that affect your ability to pay for college. 

Tip 6: Look for ways to pay in-state tuition

Most public colleges and universities charge considerably less tuition to in-state students in comparison to students from out of state. Pick a college in your state to keep costs down. Investigate regional student exchange programs, in which some states offer reduced tuition rates for students from nearby states. 

Or if your heart is set on going out of state, consider moving a year before starting college. After you've established residency (usually one or two years), you should be eligible for in-state tuition. Policies vary from school to school and state to state, so be sure to check with your school of choice. 

Tip 7: Accumulate credits before college

You'll save a lot in tuition by earning college credits while you're still in high school. Take Advanced Placement courses or think about taking courses at a local community college to get a head start on your college career. You may be able to place out of required courses by taking an "advanced standing" exam at the school. 

Tip 8: Combine degrees to save time and money

If you're planning to earn multiple degrees, you can save a year's tuition by enrolling in a combined degree program. Some schools will allow you to combine a bachelor's degree with a master's degree or a master's degree with a doctoral degree. Some colleges may offer a program that combines a bachelor's degree with an M.D.

Other colleges offer an accelerated 3-year program, or will allow you to graduate early if you complete all the requirements ahead of schedule. You can do this by taking a somewhat heavier load, such as an extra course every semester, or by taking classes during the summer. Some schools do not charge extra tuition for taking additional classes. 

Tip 9: Live at home during college

You can save a lot if you live in your parents' home when you go to college. You might miss out on some 'classic' college experiences, but your food and housing bills will be a lot lower. Or if you really want the residential college experience, compromise by spending some years at home and some years living on campus. 

Another method of saving on housing is to share an apartment with some fellow students, especially if you plan to work near school during the summer. But be sure to select your roommates carefully!

On the other hand, commuting to college can be stressful due to late busses, heavy traffic, and the occasional car trouble. Keep in mind that you will learn more from your fellow students than from classroom lectures. So this may be one cost-cutting measure you choose to overlook. 

Tip 10: Save on Textbooks

Textbooks add up to $1,000 or more a year to the cost of a college education. You can save some money by buying used textbooks, which often cost half the price of a new textbook. If you buy new textbooks, consider selling them back to the bookstore at the end of the semester. Get a copy of the class syllabus early, so you can shop around on the internet. (If the syllabus doesn't list the ISBNs for the books, you can find them on the publisher's web site. Also look on the publisher's web site for alternate formats that are less expensive, such as softcover editions and ebooks.) 

If the course only uses a chapter from a textbook, consider using the copy that is on reserve in the library. One caveat: Sometimes the library copies go "missing". Sharing textbooks with a roommate or a friend is also potentially problematic, since you may both need the book at the same time. 

If the faculty always gets the latest edition of a textbook, compare it with the older edition. Sometimes the changes aren't significant enough that you need to get the new edition, and older editions are often much less expensive on the used market. Or ask the faculty to consider using the older edition for a few more years.

Also ask faculty who use just a chapter from each book to look into custom publishing. Some publishers will assemble custom "Readings in XYZ" compilations or unbundled unnecessary features, saving the students money compared to buying the individual textbooks. Or the local copy shop can photocopy the chapters, so long as they pay the appropriate Copyright Clearance Center fees. 

One problem with ebooks is you can't keep the ebook after the end of the school year, and the cost of an ebook may be higher than the net cost of buying a print edition.

If your actual costs for textbooks exceeds the allowance that is in the college's official cost of attendance figures, consider asking the financial aid office to use professional judgment to adjust your student budget to reflect actual costs instead of average costs. 

Tip 11: Apply for 'life experience credit'

If you're entering school from the work force, you may be able to earn college credit for your employment and life experience. Some schools administer their own tests and standards while others allow you to take CLEP (College-Level Examination Program) and Proficiency Examination Program (PEP) tests for college credit.

Last Tip: A bunch of random tips

Get a part-time job. Consider cooperative education programs and study abroad. Sell your TV and VCR. Visit home less frequently. Some schools give Resident Assistants free room and board. If you're a US citizen, consider ROTC or other forms of military aid. Eat a full meal before going shopping for groceries.

Keep costs down and maximize your financial aid, and you'll look forward to graduation day all the more!

Source : Finaid.org