Many students start off at a community college to save some cash before going off to a four-year university to complete a bachelor's degree. But families won't save as much money off the total cost of a four-year degree if they don't manage the community college years carefully.
Course choice, scholarship and financial aid applications, student budgets and 529 plan distributions - the money from a tax-advantaged college investment account - should all be part of planning how to pay for a community college student's education.
Experts recommend families and students do the following to maximize college savings.
[Find out what you can buy with 529 plan distributions.]
1. Check transfer credits before enrolling each semester: A big way students can save money when starting out at community college is by letting the school know where they plan on finishing their education before they even choose courses.
Don't take two years of course work and find out nothing transfers, says Scott Sprinkle, a Colorado-based certified public accountant.
Not doing enough research could mean families would to have to pay for an extra year or two of tuition at a four-year school. If a family had saved for only two years of a four-year university education, they would now have to find a new way to pay for the extra time in school.
At some colleges, the admissions office is the place to get help planning future college transfers, says Paul Seegert, admissions director at the University of Washington. At other schools, students need to contact individual academic departments, he says.
Make sure the community college you choose has transfer agreements with four-year institutions, especially anywhere students are considering completing their education. The University of Washington has arrangements with 36 community and technical colleges in the state to accept specific transfer courses, Seegert says.
[Learn how to get access to 529 plan funds.]
2. Avoid exceeding financial aid time limits: According to federal financial aid rules, you can't exceed maximum time limits for receiving aid and course work must count toward your degree. Students should "take care of as many of the basic requirements as they can at the community college," says Kay Lewis, director of financial aid at the University of Washington.
This is another reason why students should verify that their courses will count toward a final degree. Taking courses that don't count toward graduation from a four-year school could extend a student's time in school past maximum federal and state financial aid time limits.
For instance, the maximum time limit for Pell Grant eligibility is 12 semesters. Families that normally would qualify for the federal student aid program may have planned on having these funds when determining how much to save. If they exceed the 12-semester limit, they can't count on these funds for the latter years of schooling.
"Many state grant programs have eligibility limits for time to degree, too," Lewis says. Students should check with their state department of education to verify state eligibility limits.
3. Pay cash, but don't skimp on scholarship applications: When possible, pay cash for community college, so money that is invested in a 529 plan can continue to grow to help pay for the last two years of college, says Sprinkle.
Students should still fill out the Free Application for Federal Student Aid whether or not they plan on getting loans or even accepting grants. This form is also used to evaluate students for scholarships from the community college.
If a student earns a $1,000 scholarship from the community college, parents who are paying cash would be able to deposit an extra $1,000 into the student's 529 plan for the last two years of school.
[Get tips for being successful in community college.]
4. Budget tightly: The savings from starting off at a community college doesn't just come from tuition. Skipping dorm life can nearly eliminate room and board expenses, which can add up to thousands each year.
"If the student can live with parents while attending the community college, that will save the family the cost of residence halls or off-campus apartment rent," Lewis says.
However, students can still rack up costs if they don't watch other parts of their total budget: transportation, dining out and entertainment. Families need to come up with a total budget that allows 529 plans to be untouched until students enter their junior year at a four-year university.
Trying to save for college? Get tips and more in the U.S. News College Savings 101 center.