Most parents with children heading off to college are justifiably worried about meeting the tuition bill and other costs associated with college, including room and board, transportation and fees.
But with the prospect of a family member leaving for an extended period of time, it pays to look at the cost-related issues back home, too, since car insurance, extra phone lines, checking accounts and more can be affected. Here’s how to get your changing house in order.
Car insurance takes on a new meaning once your teenage driver leaves home. Kevin Fisher, owner of the Kevin Fisher Agency in Elk Grove Village, says a lot of agencies don’t make the right recommendations when it comes to policy changes.
“The issue of insurance cost is a big concern for the family, since the rate for teens is typically the highest they’ll pay in their life-time,” Fisher said. “It’s amazing to me that a lot of agencies don’t advise people better.”
Depending on the college’s policy, Fisher says teens with cars may actually save money by taking them to school.
“Rates can fluctuate as much as 100 percent from one place to the next,” he said. “Frankly, students moving away from a big city to another area of the state will often find their rates are cheaper. The mistake a lot of people make is failing to change their address.”
Too many parents remove teens from their policy, leaving them vulnerable in a number of ways.
“While at school, what if your child was hit while inside another car or along the road by an uninsured or underinsured motorist?” Fisher asks. “Another issue related to removing your child completely is when he does eventually go to apply for insurance, there’s no record of his having had any, and the rates will be higher.”
Ownership of a vehicle isn’t used in factoring rates, Fisher says. What matters with a family is the number of cars and drivers.
“We don’t ask to see the titles of cars when we quote rates,” he said. “The only time it matters is when there are two parents, each with a car. It’s better to have a car listed under a parent’s name and list the child as a part-time driver.”
It’s important to distinguish the type of driver your college student will be. Listing a student as a part-time driver may save you up to 25 percent off the full-time driver rate; declaring a student away at school and without a car may save up to 50 percent off the full-time rate.
“Remember that good-student discounts still apply during college,” Fisher said. “Some companies allow a 25 percent good-student discount until age 25 as long as the student graduates. By age 25, the better rates kick in.”
The use and number of phone lines in your house is another area to evaluate once college begins. Teen phone lines that were installed years ago may no longer be necessary or may be assigned another purpose.
Dave Onak, director of corporate communications for Ameritech in Chicago, recommends keeping a second line for Internet or private use, or suspending service for a while.
“A lot of parents choose to e-mail their kids at school rather than make long-distance calls, so the second line may still prove to be a good investment,” Onak said. “You can also use the line for your fax machine, or for business calls your company may reimburse you for.”
Onak said Ameritech would allow you to suspend service on your second line without disconnecting entirely. That way you won’t have to pay a reconnecting charge later.
“For the first three months and 15 days, customers requesting suspended service will be charged 50 percent of their monthly rate,” he said. “This includes the charges for their basic call plan, line charges and services like call waiting.”
Once the 3 1/2 months are over, charges drop to just $1.01 per month. “The amount is unusual, but there are still line charges due to the FCC (Federal Communications Commission),” Onak said.
Another issue is banking. Access to local banks and checking accounts is easier than ever, and most students going away to school shouldn’t have to make a lot of changes. Stan Lata, a spokesman for Bank One, suggests students consider keeping their hometown accounts and adding parents’ names to help maintain them.
“Having the parents’ name on the account means deposits can be made locally, but with telephone banking services and toll-free numbers, students can easily keep their home accounts,” Lata said. “There’s still the issue of foreign ATM machines, but there are ways to set up accounts to minimize the user fees.”
For those keeping their accounts at home, Lata recommends securing overdraft protection.
“About 40 percent of our customers have overdraft protection, and for us you’ll need a Bank One credit card or savings account from where money will be automatically transferred in case of an overdraft,” Lata said. “We charge $4 each time a transfer is made, and we move money in increments of $50. The alternative is a $22 charge per overdraft, plus whatever time and additional expense there might be from the merchant where you bought something.”
Parents living near a college town themselves might consider renting the now empty room that their collegian has vacated. Annie Adelman, a certified pubic accountant with Arnold Schorn and Co. of Des Plaines, says that parents will have to claim rental income on their annual taxes and suggests writing off only the utility expenses the homeowner incurs.
“Tax law allows people to claim a depreciation on whatever percentage of space the rented area occupies, but you’ll have to pay a capital-gains tax whenever you sell the house,” Adelman said. “This year homeowners are allowed up to a $500,000 exclusion from any tax for profits earned on the sale of their house.
“Professionally, that’s why I’d recommend not depreciating anything and only writing off the utility expenses and maybe a pro-rated portion of the insurance, based on the square footage the rented area occupies,” Adelman said.
She adds that the $500,000 exclusion applies only to married couples filing jointly, and for homes that have been lived in a minimum of two years.
A TUITION OPTION
As students head back to college, their parents struggle with tuition bills. Now they can make the costs more bearable by spreading them over the entire school year rather than paying all at once. They can do it interest-free with the so-called Monthly Payment Plan. Typically, the only cost is a sign-up fee of $30 a semester or $50 a year.
The leading administrator for such plans is Academic Management Services of Swansea, Mass. (800-556-6684, www.amsweb.com). AMS runs monthly payment plans at about 2,000 schools.
If AMS says it does not handle a plan at yours, call the school’s financial aid office and ask if it offers such a program through another administrator.
— Knight-Ridder/Tribune
