college planning

Very few parents are in a position to pay for their children’s college education with cash. A combination of state and federal grants, tuition reductions (a form of grant), and low cost education loans usually end up covering over 60% of college expenses.

32561666_sThe strategy for funding a college education should be built upon a long term college planning program that utilizes investment vehicles having minimal impact upon your eventual ability to qualify for grants and low cost loans.

At the moment, Education Savings Accounts (ESAs) have some ambiguity surrounding them. These programs allow you to make non deductible contributions of up to $2,000 per year toward college savings. The “plan” earnings and account withdrawals are then free of tax as long as the funds are used to pay for approved education expenses. However, it is not yet clear how college financial aid offices will treat this money. If it is regarded as an asset of the child – then financial aid might possibly be reduced by a percentage (35% or more) of each dollar in the ESA account.

Other factors that affect your child’s ability to qualify for grants are the equity in property and businesses that you own. Although the federal aid program no longer counts equity in your primary residence as an asset for grant eligibility, many private schools still want to know this information.

The point being made here is that paying down real estate mortgages more quickly rather than funding retirement accounts can cause financial harm by forcing you to pay more taxes and receive less financial aid.

Al Rasch & Associates stays abreast of tax treatments for educational funding, is conversant with Section 529 state tuition plans, and can help you design and execute a college fund strategy that will maximize your children’s educational opportunities.