When a college student is about to graduate, the student loan debt that is racked up is exponentially high. Such a high amount calls into question the feasibility of alternate remedies of acquiring tuition money and saving to reduce the burden of student loan debts. Both students and parents can handle finances smartly to help in saving up for college.

A guide for parents

• Paying off any other debts before applying for a student loan increases creditworthiness and reduces burdens.
• An emergency fund can be set up to take care of any unforeseen events.
• A portion of income can be used as a retirement fund.

Now that the future of the parent is secure, it is advisable to set up a college fund in one of the following ways:

• Coverdell Education Savings Account (ESA) : Having an ESA allows a parent to save up $2,000 (after tax) per year, per child. Also, it accumulates interest without incurring tax. Additionally, the rate of return is higher than that of a normal account.
• 529 plan : There is an income limit for opening up an ESA. If parents do not meet the income limit criteria, a 529 plan is a better option for saving up for college. It also gives them the liberty to choose how much to invest (unlike the ESA’s fixed policy of $2,000). They can also change the beneficiary of the plan. For example, if one child decides not to get a college education, the fund can be used for another child.
• Gift to Minors Act : The parent is only a custodian in this, and the account exists in the name of the child. It is not restricted to educational purposes only, and the child gains full access to the funds when they turn 21. It also has some tax benefits.

A guide for students

• Applying for scholarships : This is a no brainer. If a student excels at something, it can be used to their advantage to get a scholarship. These are funds that need not be paid back and have no strings attached to them. Even the small scholarships count in saving up for college.
• AP classes : Advanced Placement classes give high school students access to college credits before going to college, and a student can take as many as possible. Any AP class a student takes while in school will result in one less course to take up in college.
• Getting a job : This has a dual effect. It adds to the student’s resume with experience gained, which boosts the chances of getting a scholarship and a good college. Also, it helps in saving up for college.
• Having a savings account : A parent will have to be the joint holder to the account. A savings account in the name of a person under the age of 18 is entitled to exemption of maintenance fee and can also have zero balance.