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Education Funding FAQs

Confused about funding an education for a child? A quick study of the topics below might help.


  1. When should I start saving for a child's education?
  2. How much should I save?
  3. Aren't financial aid and scholarships available for most students?
  4. What's the best way to save?
  5. What happens if I open an education savings plan for a child who then doesn't go to college?
  6. If money is withdrawn from a retirement account to pay for college expenses, will it count toward financial aid?

  1. When should I start saving for a child's education?

    It’s probably not surprising to hear that the sooner you start, the better. The best time is probably at the birth of the child. The power of compounding is on your side, so even if you can only save a small amount each month – say, $25 – that money has the potential to grow into a nice nest egg by the time your budding scholar reaches college age. Of course, it’s never too late to save.


  2. How much should I save?

    On average, tuition has been increasing by about 8 percent each year, about twice the general inflation rate.* The reality is that a child born today will probably have to pay three to four times as much for college as it costs today. That tells you it’s important to save for a child’s future educational needs.

    How much will depend on a lot of factors – such as where the child goes to school (public or private, in state or out of state) and how much financial aid the child qualifies to receive.

    Because everyone’s situation is different, try our college calculator External Link to help you determine how much you should try to save.


  3. Aren't financial aid and scholarships available for most students?

    Typically, a student can get some kind of financial aid to help pay for part of their college education, although it likely won’t cover the total cost of attending. And, the aid could well come in the form of loans. Those can be a burden on a new graduate. 

    Don’t count on scholarships, though. Only about 7 percent of students receive scholarship money from the private sector.*


  4. What's the best way to save?

    Like most financial goals, saving for a child’s education depends on your situation. Fortunately, there are a number of options open to you. The most common options include a:

    A local COUNTRY Financial representative can help you determine which option is best for you.


  5. What happens if I open an education savings plan for a child who then doesn't go to college?

    The two most common types of education savings plans are 529 plans and Coverdell education savings accounts. Money in a Coverdell can be used for primary, secondary, and accredited post-secondary education until age 30. Money in a 529 plan can be used for accredited post-secondary education only, but there is no age limitation.

    For either of these account types, if it’s determined that the funds won’t be used for the educational expenses of the named beneficiary, you’ll have two basic options:

    • The account can be re-designated, with no tax consequences, to another family member, including:

      • Other children in the family (including stepchildren)
      • Grandchildren
      • Parents and stepparents
      • Nieces and nephews
      • First cousins
      • Aunts and uncles
      • Spouse of the designated beneficiary
      • Spouse of any of the above

    • The account can be closed at any time and the balance distributed for non-educational expenses. The earnings will be taxed at the time of distribution and a mandatory 10 percent penalty will be imposed. The penalty is waived in the event of the death or disability of the beneficiary.

  6. If money is withdrawn from a retirement account to pay for college expenses, will it count toward financial aid?

    Yes. The entire withdrawal (principal and earnings) counts as income on the following year’s aid application. 

    Don’t forget – you can probably get financial aid for a child’s educational needs. You can’t get financial aid for retirement, so, if possible, avoid the temptation of tapping into your retirement account to pay for a child’s education. 

    *Source: FinAid.org


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Investment management, retirement, trust and planning services provided by COUNTRY Trust Bank®. Please see our Terms and Conditions for more information about COUNTRY Trust Bank® and its affiliates.

The information contained here is general and should not be considered legal or tax advice. Laws of a particular state and your particular situation may significantly affect the general information presented herein. The availability of the tax or other benefits mentioned above may be conditioned on meeting certain requirements. You should consult your attorney or tax advisor regarding your specific legal or tax situation.

Securities products offered through COUNTRY Capital Management Company, 1705 N. Towanda Avenue, P.O. Box 2222, Bloomington, IL 61702-2222, (866) 551-0060. Member FINRA External Link / SIPC.

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