The $100,000 Question

Graduation day. It’s a turning point in a student’s life – walking across the stage to receive a scroll wrapped in bright ribbon. Unfortunately, many students also receive something that’s downright frightening – the bill for that college education. 

The cost

According to The College Board, an independent organization that tracks costs of attendance at the nation’s colleges and universities, the average cost of a four-year public university education increased nearly 10 percent from last year. The cost of an education from a private school increased about 6 percent. 

We can’t deny that college costs are rising and they will continue to rise. Tomorrow’s graduates could be faced with loans and “bills” for their education that top $100,000! 

Ways to save

With numbers like that, it’s easy to see how quickly parents can become financially paralyzed and not know what to do. Most would like to save money for college, but many don’t know where to put the savings. There are numerous ways to save, but there are two that are the most popular.

Coverdell Education Savings Account

Money put into a Coverdell Education Savings Account grows tax-deferred and withdrawals are tax-free if used for qualified education expenses for an eligible child. Coverdell accounts can be used for elementary, secondary or college expenses, including:

• Tuition & Books
• Academic tutoring**
• Special needs services
• Uniforms**
• Educational equipment
• Room and board*
• Transportation**
• Fees
• Supplies
• Educational technology (including computers)**

*Higher education only; at least half-time student status is required

**Elementary and secondary educational expenses only

Parents aren’t the only ones who can contribute to these savings accounts. Contributions from relatives or friends in these accounts also can help ease the burden of college funding. However, only taxpayers who fall under the limits for adjusted gross income may make contributions. The limits are phased; the ranges are $95,000 to $110,000 for single filers and $190,000 to $220,000 for joint filers.

529 Plans

Congress created the 529 plan in 1996 to help families save for the enormous costs of sending a child to college. Each state operates its own plan, but you can participate in nearly any state’s plan.

A 529 college savings plan offers several important benefits to help you save for college.

• Earnings accumulate free from federal income tax.
• Many states allow a deduction from state taxes for contributions to an in-state 529 plan.
• Withdrawals for qualified higher education expenses are free from federal income tax.  These include tuition, room and board, books and fees.
• There are no income ranges to limit contributions to the plan.
• You may contribute up to $12,000 ($24,000 for married couples) each year without gift-tax consequences, and under a special election, you can invest up to $60,000 ($120,000 for married couples) at one time by accelerating five years worth of annual contributions.
• The owner (typically a parent or grandparent) maintains control of the assets.
• You can open a 529 plan for anyone – your child, grandchild, spouse or even yourself. Any unused portion can be transferred to another family member.
• You can use a 529 college savings plan to pay higher education expenses at any eligible educational institution, not just schools in the state that sponsor your plan.
• In addition to providing professional management and diversified investment portfolios, many plans allow you to place investment decisions on “autopilot,” where the portfolio is aggressive when the child is younger and becomes less aggressive as the child gets older.

Let me help

With a tangible plan from COUNTRY, you’ll get the guidance you need so you have the financial resources to deal with that little scroll with the bright ribbon – just in case it really does come with a $100,000 bill.

Working with a team of experts, I’ll lay out your choices for funding a child’s education. Better yet – I can create a plan that optimizes your entire financial future...no matter where you’re starting from.