The biggest money worry among parents with young children? How they'll afford the cost of their kids' education. But worry doesn't solve anything—careful planning does. Whether you're 18 years or 18 months away from dropping off your baby at the dorm, here's your paying-for-college cheat sheet:


Step 1: I know you want to give your all to your little one. But I don't want you saving a penny for college unless you pass my priorities test:

• Are you where you need to be with your retirement savings (putting away at least 10 percent of your income)?

• Are your own college loans paid off?

• Do you pay your credit card bills in full each month?

• Do you have an eight-month emergency fund?

• If you plan to buy a home, are you on track to make a 20 percent down payment?

Step 2: Even if you can't afford to pay into a college fund, your extended family may want to. Contributions to a 529 Plan grow tax deferred. Withdrawals for approved college costs are completely tax-free. And with most plans, the lifetime contribution limit is more than $250,000.

Find the Best 529: Buying Tips

Go Direct: There are two main types of plans: Direct-sold and Advisor-sold. You want to go with Direct-Sold, as they have lower annual expenses.

Compare In-State to the Top-Rated 529s

You can invest in any state’s 529 plan and use it to pay for college in any state. If your state offers a tax incentive for using its plan you might want to stay with your state’s plan. But first compare the all-in costs of your state’s plan to highly rated low cost plans. Over time, a low-cost plan from out of state could be a better investment than a state plan.

Morningstar’s 2015 rating of 529 Plans gave the highest marks to:

  • Nevada: Vanguard 529 College Savings Plan
  • Utah: Educational Savings Plan
  • Arkansas: T. Rowe Price College Savings Plan
  • Maryland: College Investment Plan

    You can run a side-by-side comparison of an in-state plan and these top-rated plans at

    13 YEARS OUT

    Start teaching your kids the value of money with chores that pay an allowance. In a few more years, you can have them sit with you and control the mouse while you pay your bills online.

    4 TO 5 YEARS OUT

    It's time to let your kids know if—and to what extent—you'll be able to help with college costs. The Financial Talk should empower your kids, not scare them, so offer tangible ways they can help pay:

    A. Build a strong academic résumé to up the odds for a merit-based scholarship.

    B. Do part-time work—with the intention that a portion of earnings will be used for college. I suggest a minimum of 50 percent.


    Start getting the lay of the land. The majority of families receive at least some financial aid, and all schools offering federal student aid must provide a calculator to help you estimate your actual tab. Google the name of a school your child is interested in with the term "net price calculator."


    Step 1: As your teen considers schools, make sure she chooses at least one from each bucket:

    A. Dream School If You Get a Lot of Aid. Keep in mind that the priciest schools may offer the most help.

    B. Great School That Would Drool to Have You Attend.

    C. Your Top In-State School. The average all-in cost at an in-state, four-year public school is about $10,000 less than the typical all-in for a four-year private education ($23,550 versus $12,830).

    Step 2: Plan your loan strategy. This is arguably your most critical step if you want to avoid ending up in long-term financial straits.

    Federal Loans for Students: Even if they don't qualify for a subsidized federal loan, all students are eligible to take out an unsubsidized one. Federal loan rates are typically the lowest available.

    Federal Plus Loan for Parents: The only way I approve of these is if you'll be able to keep up with your retirement savings—and pay off the loan in ten years or before you retire, whichever comes first.

    Private Loans: These loans have horrible interest rates and unfriendly payback plans.

    Step 3: There are scholarships for all kinds of kids, from golf caddies to Florida residents who are interested in horticulture. has search tips and a fabulous scholarship database.

    1 YEAR OUT

    To be considered for financial aid, you need to submit two forms:

    FAFSA (Free Application for Federal Student Aid): Nearly half of households with college-bound seniors fail to complete this application for federal loans—leaving almost $3 billion of grant money on the table, according to You can apply as early as October of senior year; aid is often given on a first-come, first-served basis. (

    CSS/Financial Aid Profile: For school-based aid and scholarships, many colleges require information not asked for on the FAFSA. Nearly 400 schools accept this form, which can be submitted as early as October of senior year. (

    I want you and your child to pick a school that won't jeopardize your financial futures. Do not use a home equity line to cover costs—or reduce your retirement savings. College at any cost: not worth it. College that's affordable: priceless.

    Suze Orman's latest book is The Money Class: How to Stand in Your Truth and Create the Future You Deserve.

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