How'd you like to send your child to postsecondary school at "Club Ed" - not to be confused with Club Med. But hey, High Point University in North Carolina offers valet parking, free ice cream and snacks, a hot tub in the middle of campus, wake-up calls, live music in the cafeteria, and concierge services that will find the discerning student concert tickets, look after dry cleaning, and more.
It's the brainchild of university president Nido Qubein, a successful businessman who believes that the "customer" comes first. Under his watch, enrolment has tripled, even at higher tuition rates. Today, the school has $100-million (U.S.) in the bank for improvements.
Okay, so you may not want to pay a premium to send your child to a spa-like university. Still, a postsecondary education won't come cheaply. So, how is the cost of that education going to be covered? Let me share a game plan.
First, you should recognize that there's more than one way to pay for a postsecondary education. You're not likely to use just one of these sources of funding. Most families use a combination of sources to cover those costs. There are, in fact, five sources of funding to think about. Your approach should be to decide today which of these methods you hope to use to pay for that college or university education of the children in your life. Call this your "game plan."
Okay, what are these five sources of funding? Simple: Begging, borrowing, stealing, sweating, and saving. That's right. Consider each of them.
Begging. I'm not suggesting that your child stand on a street corner with a cap in hand. I'm talking about asking for free money from sources that provide scholarships, awards, bursaries, grants, fellowships and stipends. Free money is good - it doesn't have to be repaid. "Begging" assumes the student has qualifications and is persistent. A high-school guidance counsellor can help with a listing of scholarships, but start looking at least one year before high-school graduation. Also, try visiting http://www.studentawards.com. By the way, most scholarships, fellowships and bursaries are tax-free sources of income.
Borrowing. Loans can be an effective source of funding. And a tax credit may be available for interest on the loan if it relates to loans made under the Canada Student Loans Act, or similar legislation. My advice? Follow the rule of tens: For every $10,000 in student loans, your child should earn about $10,000 annually over a base income of $10,000 in order to repay the loan in 10 years. If, for example, he graduates with $30,000 in loans, he ought to earn $30,000 a year, plus a base of $10,000, for a total of $40,000 annually, to be able to pay off that loan in 10 years. "Borrowing" assumes the student will have the ability to repay the debt.
Stealing. I'm not here to encourage your child to take up shop-lifting. By "stealing" I'm talking about a parent stealing from their other assets to help pay for a child's education. "Stealing" assumes you've got resources available to tap into. The best resources are disposable income, a line of credit, and non-retirement assets. I generally discourage parents from tapping into their retirement savings to pay for a child's education. Looking after yourself in retirement comes first.
Sweating. This source of funding comes from your child working during the summer months, or part-time during the school year. "Sweating" assumes your child has the time and skill to work. A student can now earn about $14,000 annually without paying any tax given the basic personal tax credit and tuition, education, and textbook tax credits (the actual amount depends largely on the level of tuition paid). As your child sweats it out on the job, be sure she doesn't work more than about 15 hours weekly during the school year, otherwise school can suffer.
Saving. This is the surest way of paying for an education, but it takes discipline. Using a registered education savings plan (RESP) makes good sense. You can contribute up to $50,000 per student beneficiary in a lifetime to an RESP (with no annual maximums any more), and an eligible child will also receive Canada Education Savings Grants (CESGs) from the government generally equal to 20 per cent of contributions to the RESP, to a maximum of $500 for each year. "Saving" assumes you've got time to save and income to make it possible.