Finance and Planning for College
The cost of a year of college has outpaced this country's inflation rate, and there is no end in sight. For a child born in 2010, you can expect tuition, room and board at any college or university to be double what it is today by the time he is ready to attend college. This is a major concern for many families, one requiring meticulous planning so they will have the money necessary to send their children to a good college or university.
Begin From Birth
To have enough money to pay for your child's college, you must begin saving from the day she is born. Begin setting aside the same amount each month in a college saving account. You'll be surprise by how much effect compound interest will have on your college savings, which, in turn, will encourage you to save even more. Don't allow the pressures of other expenses to deter you from the importance of your child's education.
Coverdale Accounts
The federal government has provided several tax advantages by instituting the Coverdell Education Savings Account (ESA). If you have less than $120,000 in adjusted gross income ($250,000 for joint filers), you qualify for a tax deduction of up to $2,000 per year. The accumulated funds can be used for almost any educational cost. The beneficiary of the account can be changed to another person in the same family so you will have control of the money. Finally, the money can be invested in a savings account, a mutual fund, stocks or bond.
529 Plans
529 Plans are educational plans that have been sanctioned by your state. They can help you lock in college costs or provide a way to save money for educational expenses. Although funds deposited in these plans do not escape federal income tax, most states allow you to reduce your state tax and the interest accumulates with no state tax.
Pell Grants
Named for U. S. Sen. Claiborne Pell, this is a grant from the federal government that is given to students in need. When a student completes the Free Application for Federal Student Aid (FAFSA), he is automatically considered for this grant and it will be a part of the award given to him by the school he attends.
Financial Aid
Most colleges and universities offer to help with a student's tuition. If you are interested in pursuing this option, first fill out a FAFSA. The government will send it to the college or university of the student's choice, and it will pass judgment on the student's qualifications. Colleges will base their financial aid on the student's financial need, and the aid may consist of both grants and loans, which must be repaid when the student leaves school.
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