Con­sider all as­pects of col­lege sav­ings op­tions

Cecil Whig - - WE ATHE R -

It’s back-to-school time. If you have young chil­dren go­ing to pub­lic schools, your big­gest ex­pen­di­tures may be on pens, pen­cils and note­books. But if you want those same kids to go to col­lege some­day, you’ll even­tu­ally face con­sid­er­ably larger costs — so you may want to start pre­par­ing soon.

Col­lege is costly. For the 2015-16 school year, the av­er­age ex­pense (in­clud­ing tu­ition, fees, room and board) was nearly $20,000 at a pub­lic, four-year school, and more than twice that amount at a four-year pri­vate school, ac­cord­ing to the Col­lege Board. Of course, cheaper al­ter­na­tives are avail­able — your chil­dren could go to a lo­cal com­mu­nity col­lege for two years at a very rea­son­able cost, and then trans­fer to a four-year school.

Still, if your child does go on to get a bach­e­lor’s de­gree, those big bills will even­tu­ally ar­rive. As you con­sider how you can best deal with these costs, ask your­self these ques­tions:

How much can I af­ford to con­trib­ute? As much as you’d like to help your chil­dren pay for col­lege, you also have to think about your own needs — specif­i­cally your re­tire­ment. Think very care­fully be­fore re­duc­ing con­tri­bu­tions to your re­tire­ment plans, such as your IRA and 401(k), to help fund a col­lege sav­ings plan.

Af­ter all, your chil­dren may be able to get schol­ar­ships and grants, and even if they have to take out loans, they’ll have many years in which to re­pay them — but you can’t post­pone sav­ing for re­tire­ment with­out jeop­ar­diz­ing your abil­ity to en­joy a com­fort­able lifestyle.

What col­lege sav­ings plan should you con­sider? A num­ber of col­lege sav­ings op­tions are avail­able. For ex­am­ple, you could con­trib­ute to a 529 plan which of­fers po­ten­tial tax ad­van­tages and high con­tri­bu­tion lim­its. You might also con­sider a cus­to­dial ac­count, such as an UGMA or UTMA, although when your chil­dren reach the age of ma­jor­ity, they are free to do what­ever they want with the money — and their plans may not in­clude col­lege.

What will be the ef­fect of a col­lege sav­ings plan on fi­nan­cial aid? When col­leges de­ter­mine fi­nan­cial aid pack­ages, they will eval­u­ate your child’s as­sets dif­fer­ently than your as­sets. Your child typ­i­cally would be ex­pected to con­trib­ute 20 per­cent of his or her as­sets, while you are only ex­pected to con­trib­ute up to 5.6 per­cent of your as­sets. Con­se­quently, you may be bet­ter off sav­ing for col­lege in your name, rather than your chil­dren’s.

As you can see, you’ve got sev­eral fac­tors to think about when it comes to help­ing your kids meet their higher ed­u­ca­tion goals. Study up on these op­tions, so you can find the right an­swers for your fam­ily’s needs.

This ar­ti­cle was writ­ten by Ed­ward Jones for use by your lo­cal Ed­ward Jones Fi­nan­cial Ad­vi­sor.

Newspapers in English

Newspapers from USA

© PressReader. All rights reserved.