Preparing and Paying for College
Saving for College
When saving for college parents typically use one of the following four investment plans:
1) 529 plans
These plans provide a tax benefit of not taxing the growth on the account as long as the funds are used for qualifying educational expenses.
2) Invest in accounts owned by the parents
These are taxed at the parents’ income tax rate but can be used for other purposes if not needed for college.
3) Invest in accounts owned by the child
These are taxed some at the child’s income tax rate and some at the parents’ rate. The drawback is the funds are owned and controlled by the child when they reach the age of majority (typically age 18).
4) Invest through a trust
Trusts allow for a lot of flexibility and control by the grantor (contributor) to the trust
Paying for College
In addition or in lieu of the funds saved for college many people will use the following to help pay for college:
Scholarships
There are numerous scholarships available for college. Some are extremely difficult to obtain but could cover the entire cost of college. However, there are many others that are smaller in amount but can help with some college costs. These can be through churches, civic groups, nonprofit organizations, etc. There are also many available through the many organizations on college campuses.
Financial Aid
Many people will qualify for some type of financial aid. Some of these are grants which do not have to be paid back and others are loans which do require pay back. The amount of income and assets the parent and the child have can affect the amount of aid you may receive.
Resources
There are several quality resources you can use to get more information about savings and paying for college. Some of these are listed below:
- College Foundation of NC at www.cfnc.org
- Federal Student aid at studentaid.ed.gov
- 360 degrees of Financial Literacy at www.360financialliteracy.org
- Your financial advisor or CPA
- High School Guidance Counselor
- College financial aid office
