Highlights from the Dave Ramsey Show

QUESTION: Ben on Twitter asks what the best way to pay for college is without parental assistance.

ANSWER: It can be done. It's difficult, but it can be done. The first thing you've got to do is right before you enter college, that summer and spring and winter before, you have to be working like a crazy person and building up the money to make it that first semester.

That's a big deal. The second thing is your college choice is going to be very important. You're broke. Your parents are broke. You are not going to an expensive school if you're smart. You're going to choose something that's very inexpensive. That could be even a community college where you live at home and do your first year or two at community college as a community college student. In some states, it's almost free or free. In other areas, it's a tenth or half as expensive as a university to knock your first two years of basics out and get your core stuff done. That'll get the ball rolling for you and saves you a lot of money. If not, then at least go to an in-state school where you're saving the money. You're paying in-state tuition at a state college and trying to find something that's local where you can live at home and do that.

To give you an idea, the average in-state tuition is about $8,000 right now. When you divide that out, it's about $700 a month. You can make $700 a month delivering pizza. Go deliver pizzas every night. You'll make $1,500–2,000 a month with tips if you have a decent route that you're running. Or cut grass or whatever. Seven hundred bucks a month for tuition, and buy used textbooks and live at home—you can get through school that way. You really can. That's doable.

That's the kind of thing you have to think about—your living situation, the college choice, and you're going to be working, obviously, to earn an income. Lastly, I would make sure if anyone in the family, including you, can scrape together the money, to be tutored on the ACT/SAT tests. Take them multiple times because every one of our kids took them two or three times, and each time they took the test, they got better scores. Each time they took the test, we paid for them to be tutored, and they were more prepared to take the test the next time. Of course, the higher the score, the more scholarships and grants that you qualify for. You can really get into some serious money that way, and then you're going to spend a lot of time applying for scholarships and being turned down, applying for scholarships and being turned down, but I don't care if you apply for 1,000 scholarships and you get 10 of them. If you get 10 of them at $1,200, that's $12,000.

Lastly, what I would tell you to do is get our Custom College Guide. It's $139.99, and you can learn more about that and it gives you a guideline on schools. It'll help you select the schools, and it'll fill out all your FAFSA stuff for you as a part of the process. It's a great $140 to spend on that process as well. You can find out about that at daveramsey.com/collegeguide or just call them at (855) 63-GUIDE.

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QUESTION: Amy wants to know if they should take a deferment on their student loans in order to make larger payments on their smaller debts. The $1,200 monthly student loan payments would pay off some of their smaller balances. Dave doesn't see any problem with it.

ANSWER: There's nothing wrong with it, but it's a pay-me-now, pay-me-later thing. Deferment does collect interest. You aren't really getting away from it. But it does help the cash flow and help to get the debt snowball rolling and give you a sense of accomplishment. I don't think there's any big problem with doing that.

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QUESTION: Cindy in California heard an unused Post-9/11 GI bill can be transferred to children. She wants to know if she should save in an ESA or a 529 plan or rely on the GI bill for her child's education.

ANSWER: I don't know that I would do an Education Savings Account, because that has to be used for college. The Post-9/11 bill will pay for college, which is a wonderful benefit.

Once you've gotten to Baby Step 5, where you are out of debt with a full emergency fund in place and are saving 15% of your income for retirement, I would save some money for your kid's college, but I would save it in your name. That means when they get to college, there will be a few odds and ends that the 9/11 bill won't cover.

There is also a slight possibility they change that on you because we've got this little thing going on called a fiscal cliff. They are going to cut a bunch of stuff eventually. They will either do it voluntarily or they'll do it because they've completely run out of money and the economy collapses around their ears.

Someday, somebody is going to say no to somebody, and you could be on that list. I hope you're not, and I'm not predicting that. But just in case, I'd love for you to have some money set aside for college. I wouldn't count on the government.

I would not do a 529 or an Education Savings Account for college, because if you use that money for anything other than education, you are going to get taxed on it and penalized for it huge. You can do an UTMA, but that's in their name. You can use that for anything; that's just a mutual fund in your kid's name with you as a custodian. You could do that as well.

An UTMA is fine, or if you just have a mutual fund and you call it "kid fund." That gives you the money to do something for education if there is a problem and/or there are things that the bill doesn't cover. I wouldn't say that it allows you to save nothing for college, but I would say to not use the 529 plan or the ESA because you probably have that covered with this bill.

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