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While these figures might seem staggering, a number of aid programs and tax-deferred savings options are out there. The key is to plan ahead and do your homework to discover which ones best suit your needs. Remember, college is a long-term investment. Like other investments, such as buying a home, most families pay for college through a combination of savings, current income and borrowing.
Tax-Deferred Savings
When it comes to college planning, the earlier you begin, the better. Saving any amount of money and investing the right way can make a big difference in what you can afford to pay. The good news is you have options! There are several college-saving options that offer tax benefits.
- Coverdell Education Savings Accounts – Earnings grow tax-deferred and distributions are tax-free when used for qualified education costs. There are income restrictions and the investment is limited to US $2,000 per year per beneficiary.
- 529 Plans1 – These state-operated investment plans offer a federal-tax-free way to save for college. They are available in two forms: college savings plans, which let you use funds for college expenses at any college, and prepaid tuition plans, which let you lock in future tuition at any state public colleges at present-day prices. There are no income restrictions to qualify for 529 Plans, and many programs allow generous maximum contribution limits – some as high as US $250,000 per beneficiary.
- U.S. Savings Bonds - Earnings from series EE and I bonds grow tax-deferred, and in some circumstances earnings are tax-free if used for tuition and fees. There may be income restrictions that apply.
Other Aid Options
The US Department of Education offers grant, work-study and loan programs. The application process generally begins by completing the free application for Federal Student Aid, or FAFSA. The earliest a child can do that is January 1 of his or her senior year in high school. Eligibility is reconsidered every year they want to apply for aid. While many programs are based on financial need, some are not.
- Also be sure to contact your state’s higher education agency to find out about any available state financial-aid programs. And talk with high-school counselors and financial-aid departments at prospective colleges.
- Private scholarships are another source of education funding. The Internet offers a number of scholarship “search” services. If you’re not online, local libraries also can help.
- And don’t forget to check with employers, foundations, religious and civic organizations, fraternities and sororities for any financial-assistance programs.
Be Cautious
As you investigate different programs, beware of companies that falsely promise or guarantee scholarships, grants, or fantastic financial –aid packages for a fee. According to the US Federal Trade Commission (FTC), these unscrupulous operations use high-pressure sales tactics at seminars, and you are required to pay on the spot or risk losing out on the “opportunity.”
Consult Your UNFCU Raymond James Financial Advisor
When it comes to financial planning, there is no substitute for one-on-one guidance and advice. Because one size does not fit all, your financial advisor will help you create a college financial plan that is right for you where ever you may be. As part of the process, your advisor will review all aspects of your financial plan, including your future goals and current investment strategies. Contact us to schedule an appointment with a Raymond James Financial Advisor for a complimentary consultation.
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