529 College Savings Plans and additional options for Child College Funds

529 College Savings Plans allow individuals to save money for a family members college education costs. The money invested grows tax-free if the withdrawals are used on qualified educational expenses. Depending on your state of residency, you may qualify for a state income tax deduction on a portion of the contribution. There are penalties and taxes due if the money withdrawn is not used for qualified expenses. Note: After 1/1/2018, 529 plans can now be used to pay for elementary and high school education expenses.

A: Each person has different goals in funding their children’s education, however it’s imperative to map out potential expenses and how you’ll pay for them at that point. In addition, have a conversation with your children when they are in high school telling them to what extent you’ll pay for their college education. Deciding how much to save for college will vary.

A: With multiple children attending college, potentially at the same time, mapping out your future cash flow and expenses is imperative to your financial plan. It will be far more achievable to save money over time for this expense, than to try paying for it out of pocket.

A: Typical funding sources for college include: 1. Parent cash flow & savings, 2. Child cash flow & savings, 3. Scholarships from the university and others, 4. Student Loans. As a parent, keep in mind you may help your child pay off student loans after they graduate, depending on your cash flow.

A: The Free Application for Student Aid (FAFSA) is the form that is used annually by current and prospective students to determine your eligibility for student financial aid.

A: College tuition costs have increased at a significant rate the last two decades. As a result, even the best students with a strong work history won’t be able to pay for 1/3 the cost. Paying for college has become a family expense, using time and a team effort to pay the bills.

There are scholarships and other incentives a university can offer to make the cost more palatable for your family. Consider applying to comparable universities as means of negotiating a better price. The University system is a big business and creating completion competition between schools for your child (checkbook) can lead to cost savings.