College Savings Accounts
When it comes to paying for college, not every student will land a full-tuition scholarship, and federal student financial aid seldom takes care of all college costs. If you're a parent or relative looking ahead to cover costs and reduce loans, finding scholarships is a great step, but also consider planning ahead and research college savings plans.
529 Plans are state-operated accounts that offer tax advantages when used for qualified educational expenditures. Each state offers at least one 529 plan. The two types of 529 plans are prepaid tuition plans and college savings plans. Prepaid tuition plans allow parents to purchase tuition credits that will cover the cost of future college expenses at their current rate - typically at in-state, public universities. College savings plans, although more flexible, do not offer a guarantee but come with a variety of investment options and opportunity for higher returns.
Roth IRA's are special retirement accounts where you pay taxes on money going into your account and then all future withdrawals are tax-free. Roth IRAs can be used to save money for school. As long as you're withdrawing contributions, rather than earnings, there is no penalty if you are using the money from your IRA for educational expenses. However, a college savings plan may be a better option if you're setting up an account specifically for your student since contributions to a Roth IRA must come from the beneficiary's earned income. Dipping into your retirement funds to pay for college is widely regarded as a less than ideal choice by financial experts.
The Uniform Transfer to Minors Act allows a minor to receive gifts without the help of a guardian or trustee and without the establishment of a trust. While the aforementioned options have been either savings accounts or investments, UTMA covers everything, including property. An adult manages these assets in a custodial account until the owner reaches the age of 18 or 21, depending on the state. In the meantime, the funds in the account can be used to benefit the child, including taking care of educational expenses. Once the owner reaches the age of majority, the assets are theirs to use as they please. This can mean paying for school, or it can mean making less desirable financial choices. Since these assets belong to the student, they would count against them for student financial aid.
Last Edited: August 2016
Latest College & Financial Aid News
December 1, 2016
by Susan DutcaPerhaps your 2017 New Year's Resolution is to earn more free college money - that's our goal for you! 2016 is now coming to an end, and so are these scholarship deadlines, so hurry and apply to these end-of-the-year awards while you still can! Girls Who Illustrate Awesomeness Scholarship [...]
November 29, 2016
by Susan DutcaThe incoming Trump administration could reverse President Obama's actions on college sexual assault, giving hope to those who claim their lives were destroyed by false rape claims. However, this raises concerns for some that perhaps those who have been victims of sexual assault and made legitimate reports may not get the protection they deserve. Since 2011, colleges and universities have been [...]
November 22, 2016
by Susan DutcaStudents are being called to "expose and document" professors "who discriminate against conservative students, promote anti-American values, and advance leftist propaganda" on a new website called Professor Watchlist. Turning Point USA, a 501(c)3 non-profit organization founded in 2012 promotes ideas of free-market capitalism and "educates students about the importance of fiscal [...]