College Expense Planning

Are you aware that according to the 2002 Trends in College Pricing, published by the College Board, estimated costs of tuition, fees, and room and board for four-year public university in 2022 will be approximately $128,164? For a private university, the approximate cost is $304,142.

College is expensive, and the cost will only continue to rise. With an average annual increase of 5-9% each year, it may take a small fortune to put your child through college.

We can help.

The basics of financial planning used in conjunction with the proper tax-saving vehicle can allow families to pre-fund college expenses for pennies on the dollar. In addition, some of these vehicles can be great tools for parents and grandparents to use for trusts and estates planning.

College Savings options:

UTMA Uniform Transfer to Minors Act

It is a simple way for minors to own securities without the use of employing an attorney to set up a trust. A donor must appoint a custodian and specify the recipient. The donor then irrevocably transfers assets in to that account. The assets are controlled by the custodian until the child attains full control at age 21 (18 in some states).

Coverdell Education Savings Account

Formerly called an Education IRA, money is contributed to an IRA in the child's name to fund education expense. Offer tax-free and penalty-free distributions when used to fund educational expenses. Penalties and taxes apply to nonqualified expenses. Contribution limit is capped at $2,000 per year. May have some negative financial aid implications.

529 State Prepaid Tuition Plans

It allows people to lock in today's tuition rates to fund tomorrow's education costs. Plans are guaranteed by the state government. Proceeds cover tuition and mandatory fees only, not room and board.

529 State College Savings Plan

Allows an individual to contribute money to an account established to pay for a child's higher-educational costs. Earnings at the federal level are tax-deferred and become tax-free when withdrawn, if used for qualified education expenses such as tuition, room and board, books and other related fees. Nonqualified withdrawals are subject to taxes and penalties. Some states may offer additional tax benefits for persons investing in their own state's plan. As with any investment, the potential for gain is not guaranteed and there is a risk of loss of the principal. Proper management and monitoring is a necessity.

Do you:
Understand the financial aid process?
Know your Expected Family Contribution (EFC)?
Know how to finance your family's share of college expenses?
Know how to construct a college budget based upon the adequacy of your retirement plan?
If you answered "no" to any of these crucial questions, we would suggest that you need professional financial advice