Your child just received that long-anticipated acceptance letter from collage. Maybe they are ready, but as the parent or guardian, how ready are you? Did you plan ahead? A child’s college tuition could be one of the largest expenditures you ever make, and some major sacrifices probably will be necessary.

With rising college costs, there will be some tough questions to answer, and difficult choices to make about their education.

The first question to consider is this: Is a college education a wise investment? You could borrow most of the money necessary to cover the costs, but will it be worth it in the long run?

It’s estimated that 11 million borrowers will take out college loans this school year. When you finance the majority of the cost, you run the risk of saddling yourself or your child with a debt that can last for years. Remember, it’s not just the principal you’ll be paying back; it’s also the accrued interest that keeps mounting over the life of the loan.

What about the interest?

In July 2013, the U.S. Senate approved the following interest rates for college student loans: 3.9 percent for undergrads; 5.4 percent for grad students; and 6.4 percent for Parent PLUS Loans. The rates are fixed over the life of the loan, but future loans will adjust to the 10-year Treasury note yield. Congress set a cap on all loans of 8.25 percent for undergrads, 9.5 percent for grads, and 10.5 percent for PLUS Loans.

What costs the most?

Many people do not realize it’s not the cost of books and tuition that takes the biggest bite out of your wallet. It’s the food, housing, and those extracurricular activities — the things influenced by lifestyle choices and peer pressure. Encourage your child to live with relatives if possible, or find alternative less expensive off-campus housing.

Can tuition costs be reduced?

Some, but not all, educational institutions offer tuition discounts and flexible repayment programs. Put that question at the top of your college-shopping list. There are a variety of plans; some have discounts if you pay semester costs up front; others cut your costs if you allow automatic monthly withdrawals from your bank account.

If your college of choice offers an accelerated program and your child is driven and willing to sacrifice summer breaks and a few extracurricular activities, they might be enticed to complete their degree in three years instead of four. That could be an enormous money saver.

While they are still in high school, encourage them to take advantage of placement courses that earn college credits. The fewer the classes taken in college, the lower the tuition costs.

Community college and work options

There is always the good old standby: Community college. Get the basics out of the way at a substantially lower cost; then transfer later to a four-year college.

If your child is willing to work through school, consider a cooperative education that includes paid internships. It might take a little longer before graduation, but the extra earnings and real world work experience could be worth it.

If they are fortunate enough to secure employment with a company that supports education, such as Intel or U.S. Bank, a portion of the college costs could be covered. Note: These opportunities sometimes apply only to advanced degrees, such as MBA completion programs.

Some families with fewer resources are still willing to make the sacrifice to get their children into Ivy League schools by financing their homes, or having a two-income household, with the second income committed to a college savings fund.

Be creative

Look for ways to finance the least amount possible. Apply for grants, save, watch spending and lifestyle, and consider some of the options mentioned here. Remember, you are financing your child’s future, and sometimes, the greatest gift you can leave them is zero debt after college.

Judith A. McGee is the chair and chief executive officer of McGee Wealth Management, Inc., an independent registered investment advisor. She is a co-branch manager of, and offers securities through, Raymond James Financial Services Inc. (Member FINRA/SIPC) in Portland. Contact her at 503-597-2222 or This email address is being protected from spambots. You need JavaScript enabled to view it..

The information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete. Any information is not a complete summary or statement of all available data necessary for making an investment decision. Any opinions are those of Judith A. McGee and not necessarily those of RJFS or Raymond James.

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