Student Debt May Mean More Than Tuition Thanks to New Regulations
Now that your student is away at college, there are plenty of financial pitfalls they can avoid with a little planning.
Saving Late for College Expenses
The "Money Talks" hosts discuss a plan of action for a family that hasn’t saved for college educations expenses.
Important Changes to Education Savings Accounts (ESAs)
Beginning in 2011, Education Savings Account contributions will be capped at $500 per year per child, and expenses for primary education will not be considered qualified expenses. For more changes to these accounts and recommendations on what you can do with funds in an ESA, read this Financial Strategy.
Four Things To Do With Your Tax Rebate
If your thoughts of spring include a tax refund check, you may opt to use your windfall to benefit your future, rather than spend it now. Some uses you may consider include adding your refund to your retirement savings or investing in continuing education. For more ideas on how to make your refund work for you, read this C.P.A. Insight.
Section 529 College Savings Plans
Section 529 College Savings Plans offer families an effective way to save for college costs including tuition, books and room and board. The advantages to 529 Plans include portability, tax advantages, age-based asset allocation and professionally managed portfolios. However, there are some disadvantages as well. For more information on these drawbacks and who should consider a 529 Plan, read this Financial Strategy.
Saving to a Roth IRA for Future College Expenses in the Parent’s Name
A Roth IRA account can be used to save for both retirement and education expenses; however, there are some disadvantages to doing so, including lower contribution limits and the possibility of taxed earnings. For more information on Roth IRA rules and how an account affects education savings, read this Financial Strategy.
Update on College Tax Breaks
The American Reinvestment and Recovery Act of 2009 provided several tax incentives regarding saving for college and paying tuition for higher education for the 2009 and 2010 tax years. For more information on how the Act affects 529 College Savings Plans and the newly created American Opportunity credit, read this C.P.A. Insight.
Section 529 Prepaid Tuition Plans
One of the many ways to pay for a college education is a Section 529 Prepaid Tuition Plan. This plan allows you to lock in tuition at the current rate. One caveat to this plan is that it is considered a parental asset, causing a dollar-for-dollar reduction in financial aid eligibility. For a detailed comparison of the advantages and disadvantages of a prepaid tuition plan, read this Financial Strategy.
Georgia’s 529 Plan—Path2College 529 Plan
Residents of Georgia are eligible for a state tax deduction for contributions to Georgia’s 529 College Savings Plan regardless of income. Because of this tax benefit, residents should consider this plan as a savings vehicle for higher education costs. For more information on Georgia’s plan and the seven available investment options, read this week’s Financial Strategy.
College Planning Overview
A college education will be one of the most expensive purchases a family will make, so it is best to start saving early to an account specifically designated for education funds.