Personal Assets That Can Help You Pay for College

Savings: One of the Best Personal Assets for College Tuition Figuring out how to pay for your childs college education can be daunting. If your student has a shortfall, then figuring out if any personal assets are viable options for making up the difference is wise.Even if your child could cover it with student loans, choosing to use certain personal assets to pay for college might be a better direction.If you want to explore which options might be available to you, here are a few worth considering.Please note: We are not financial advisors. You should always speak with your Certified Financial Planner or Advisor before deciding to tap into financial assets for college.529 College Savings Plans529 College Savings Plans are personal assets designed to help students pay for college. Plus, they are factored into FAFSA calculations (albeit minimally), affecting your childs ability to secure need-based aid.By using funds from a 529 plan to pay for college, you increase your students eligibility for need-based aid in subsequent years and put the mon ey towards its intended purpose. Additionally, by directing the money to qualifying college expenses, you avoid paying taxes on any earnings, which is a bonus in and of itself.Ultimately, by directing 529 savings towards your childs educational expenses, you are allowing these personal assets to serve their ideal purpose, making college more affordable for your student.Savings: One of the Best Personal Assets for College TuitionWhen it comes to paying for college, cold hard cash is hard to beat. Even if you cant pay for college entirely with savings, this is one of your personal assets that smart to tap.Why? Because savings accounts typically dont earn much interest. Even high-yield savings accounts generally dont make more than 1 percent annually, which usually doesnt beat inflation, let alone the interest rate on a student loan.Plus, money in savings is factored into your students FAFSA, lowering the amount of financial aid they receive.Cashing Out Non-Retirement Investment Accoun tsStocks, bonds, CDs, money market, mutual funds, and other non-retirement investments are other personal assets that are factored into FAFSA calculations. Having these forms of investments can lower the amount of financial aid your student qualifies for, increasing the odds that they will need scholarships, loans, or other sources of money to pay for college.Cashing out your non-retirement investment accounts can free up funds to help cover your childs tuition. Plus, in subsequent years, they may qualify for additional financial aid based on their FAFSA, decreasing the out-of-pocket expense.However, you dont want to rush to cash out these personal assets without doing some research. If an investment is earning more in interest than a student loan costs, youll experience a net loss.For example, if your investment account is earning 8 percent annually, and your student qualifies for federal Direct Subsidized or Direct Unsubsidized loans at 4.45 percent (the current amount for disburs als before July 2018), keeping the investment may be a smarter financial decision as long as the impact to your childs FAFSA is minimal. This is especially true for subsidized loans where they dont begin to accrue interest until after your student graduates.If your investment is earning more, but you still want to free your child from student loan debt, you can always cash out once payments are due. This allows you to earn interest while they are in school, creating a net gain, yet still cover the costs.But, if you discover that your personal assets held as investments arent earning more in interest than a student loan costs, using your non-retirement accounts to pay for college can be a great option. This is similarly true if cashing out and using the money to pay their tuition allows them to access more financial aid based on their subsequent FAFSA and creates a net gain situation.Related articles:How Scholarships Can Free Up 529 Plan MoneyHow to Pay for CollegeShould Parents Pay for College?Real Estate as Personal Assets to Help Pay for CollegeIf you own real estate, with or without a current mortgage, it can be a vehicle for paying for your childs college. Typically, you have a few options for using these personal assets, depending on the property type, its value, and the remaining amount you owe.Home EquityHome equity can be a source of money to help pay for college. Generally, youll need to take out a home equity loan, do a cashback refinance, or open a home equity line of credit to access these funds.The amount you can take out varies depending on your situation. For example, between your mortgage and any subsequent home-related credit, you might need to leave at least 20 percent in equity untapped to satisfy the lender and avoid costly PMI.Lenders have a lot of say regarding the use of home equity. Each institution can set its own standards regarding qualifying, interest rates, fees, and more. In some cases, the interest rate and fees would cost more t han securing a student loan for a similar amount, so youll need to see what costs come with using your home as a source of money for college expenses.Its also important to note that your house serves as collateral for these loans and lines of credit. If you fail to repay the lender, they can attempt to foreclose on your home. Typically, a familys home is one of their most valuable personal assets, so this decision shouldnt be taken lightly.Secondary PropertiesIf you own additional properties, such as rentals or vacation homes, then you have some options here as well. For example, you can use equity on the property to fund your childs education or sell it if you dont need it.Ultimately, you have to determine if these personal assets need to be maintained or if you can let them go. Income-generating properties may produce enough money to make them worth keeping, and vacation homes provide you with enjoyment that would otherwise be unaffordable.However, you do have options for using th ese personal assets as a way to pay for college, so its worth exploring if you havent considered it already.Qualifying Retirement AccountsTypically, tapping your retirement accounts for purposes other than retirement isnt ideal. These personal assets provide you with security after you leave the working world, allowing you to live comfortable by using the money in place of traditional income.However, if you have a Roth IRA and dont have any other option, you can withdraw your contributions tax-free should the need arise. Additionally, if you are at least 59 , you can use your earnings without penalty if youve held the account for at least 5 years.As long as earnings withdrawals are used for qualifying college expenses, including for your child, you wont pay a 10 percent penalty for an early withdrawal. However, you will owe taxes on the money.Additionally, there is no benefit on the FAFSA for using personal assets in retirement accounts. These funds arent used in FAFSA calculations for need-based aid, so only choose this option if no other choice remains.Other Personal Assets Worth ExploringIn some cases, you may have additional personal assets that could help your child pay for college. Vehicles, collectibles, art, and antiques, and similar items, may all have value.Generally, you would have to sell these items if you want to help with college tuition. In some cases, this can be challenging, particularly if you want top dollar.For example, art and antiques may require you to work with a reputable dealer or auction house, which means youll need to pay a commission. Further, it can take a lot of time to find a suitable buyer, so some of these personal assets might not be very liquid.But, if you happen to have some valuable items on-hand and are willing to part with them, it doesnt hurt to see what they are worth and determine if selling them would be a smart decision.Ultimately, which personal assets you choose to use to help your student pay for college will a lways be a personal choice. Just make sure, if you do use some of your assets, that youll experience a net gain when compared to securing student loans or other options. That way, you know you are coming out ahead, which is usually the most important goal.If you and your student would like to learn more abouthow to find scholarshipsthat can help pay for college, sign up for ourfree college scholarship webinar! We cover how to spot the scams so you can make sure your student is applying to scholarships that are actually worth their time. Join the next free training here:www.thescholarshipsystem.com/freewebinar.