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Saving for College While Paying Off Debt

When saving for college, most people put money away in traditional college savings accounts. The most common of these are tax-deferred 529 College Plans, UTMA (Uniform Transfer to Minors Act) and UGMA (Uniform Gifts to Minors Act) accounts, and the Coverdell Education Savings Account. While these accounts have great tax advantages, there are some drawbacks, such as maximum deposit limitations and possible reductions in FAFSA (Free Application for Federal Student Aid) benefits.

When you’re trying to pay off debt, it can be difficult to save as much as you want for your child’s college education. But there is hope—along with the traditional ways to save, here are some nontraditional, cool ways to put money away for your child’s college education.

Get Your Child to Pitch In

If you’re starting late in your child’s life and she is a teen or preteen, have her pitch in to save money for college. Whether your child has a part-time job, babysits, or gets a regular allowance, having her put some money away will teach her the importance and rewards of saving. Make it a fun challenge and match your child’s contributions, from one to five times the amount she saves. It’s always a good idea to include your child in saving for college.

Use Upromise Rewards

Upromise Rewards is a loyalty program by Sallie Mae, where members accrue credits on eligible purchases from places like grocery stores, online retailers, travel, restaurants, and gas stations that can be directed to a college savings plan or used to pay student loans. Those earnings can be directed into a high-yield savings account or a tax-deferred 529 plan, or you can request a check for the amount you earned. Shopping for items you normally purchase can rack up credits toward savings for your child’s education.

Save with SAGE Tuition Rewards

SAGE Tuition Rewards is a unique private-college savings program that uses Tuition Rewards Points, which are like frequent flyer miles for college tuition. The Tuition Rewards Points earned represent the participating private colleges’ and universities’ scholarships, which an eligible student can receive when they attend a member school. The schools can count the Tuition Rewards Points as part of their merit institutional and merit scholarships. For example, 10,000 Tuition Rewards Points guarantees a minimum scholarship of $10,000, spread equally over four years, at a SAGE member school. Typically, Tuition Rewards Points are earned by saving or investing with one or more financial partners or by being an employee of a company that is partnered with SAGE to provide Tuition Rewards as an employee benefit. You can also earn Tuition Rewards Points by getting a life insurance policy through a participating life insurance company.

Plan Using a Cash-Value Insurance Policy

Most people don’t think about life insurance as a savings tool, but one great thing about permanent life insurance policies is that they build up cash value. A major advantage of using a cash-value policy for college savings is that money in an insurance plan will not reduce your eligibility for financial aid. Unlike money in a 529 college savings plan, which can reduce your financial aid, cash-value life insurance policies are not included in the federal financial aid formula, according to the Department of Education.

These nontraditional ways to save will allow you to focus on paying down your debt while saving for your child’s college education.

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