Preparing for the financial responsibilities that come with sending a student to college can take a lifetime of planning. Tuition rates are already considered high and future projections only represent another expected hike. Follow these tips to better save for college.
Start Early
A savings has the ability to grow overtime. This logic results in less needing to be contributed over time. Waiting until the child is in high school will drastically cut the amount of money available to send your student off to college.
529 College Savings Account
The benefit of using this type of account is that the savings can build tax deferred. Also, funds used to pay costs related to college can avoid federal income taxes. Most account limits are $250,000 but withdrawals can only be used for college living and equipment costs.
Prepaid Tuition Plan
As college tuition rates increase year to year, a beneficial savings plan may be to use a plan that builds with a stagnant tuition number secured. In the past ten years, costs for a private nonprofit four year college has risen 24 percent. Due to state funding cuts, this spike is even more drastic. Families can select from either a state plan or the Private College 529 Plan. The locked in amount for the first will only apply to one particular state, whereas the private college plan covers a range of 270 private universities and institutions.
College Savings vs. Financial Aid
The FAFSA is a component of every child’s higher education that will be used to asses the eligibility for financial aid. It will take into account factors such as the EFC or Expected Family Contribution. The more a family makes, the less financial aid will be an option for the student attending school.
As time progresses, also be sure to keep up to date with any changes to government regulated programs and guidelines.
