This may surprise you, but one of the most popular family holiday gifts isn't a phone, tablet, game, watch or even a big-screen TV.
It's the gift of college -- at least paying for it. And what a gift that is and could be: The average price tag for a state school is now around $100,000 for a four year degree; $200,000 for a private college.
Of course, most middle-class families have hardly saved a fraction of what they need to pay for college. Most of them will go into debt, adding to the 42 million Americans who are already neck-deep in college loans.
Fortunately, there are several things you can do about the high price of college. Here are some useful tips:
-- Make it a family affair. Parents, you don't have to go this alone. Get grandparents, aunts and uncles involved. Instead of buying stuff for holidays, birthdays, confirmations, bar/bat mitzvahs, put some cash in their college funds (see below).
According to a survey by the College Savings Foundation, (CSF) some 58% of families polled said they would ask for help funding college from "friends and family to help by making a gift of college savings instead of a material gift."
Don't be afraid to ask. The high cost of college is no secret shame. Lots of people are willing to help.
-- Set Up a 529 Savings Plan. Every state offers one, which is a group of mutual funds set up to pool money for college. If used for college-related expenses, money in these plans compounds tax-free.
Some states even give you income-tax breaks for contributing to them. Although you can invest in any state's plan, check with you home state first. Here's a list of the highest-rated plans.
According to Richard Polimeni, chair of the CSF,"34 states provide a state income tax deduction or credit for contributions to a 529 account. Most states allow the deduction/credit only if the contribution is made to the home state 529 plan. However, five states (AZ, KS, MN, MO, MT and PA) allow the deduction for contributions to any state’s 529 plan."
-- Plan Ahead. In addition to gifting, families can plan ahead for college expenses. What colleges are your children likely to attend? Keep in mind that private schools may have more money to offer than public universities.
If you have children in high school, consider scholarship opportunities. Have they scored high on standardized tests like the ACT and SAT?
Those who score in the top 10% automatically qualify for grants. High grade point averages also get them in the ballpark for scholarships.
At the very least, start a family discussion on how to approach college without getting into debt. Involve grandparents in the conversation.
“In addition to holiday gifts, year-end is also a time when grandparents, friends and other family may want to take advantage of Federal gift tax rules,” Polimeni added.
"In 2017, Federal gift tax rules allow up to $14,000 for an individual and $28,000 for a joint gift by spouses – and up to five years’ worth of up front gifting totaling as much as $140,000 for a couple under the gift tax exemption."
While many families find it difficult to ask for money instead of things that can be wrapped up and played with, here's one thing to keep in mind: Long after those toys have worn out or lost their luster, the gift of college will endure.
