College Admission Help

Do your homework on college grants and college savings plans
For some, saving money for a child’s or grandchild's college education seems nearly impossible. Before you give up the battle, however, consider this: A high school graduate will earn an average annual income of $26,416. A college graduate will earn an average annual income of $34,000 to $74,000. For someone who works 40 years, that can add up to an additional $320,000 to $1.92 million in earnings. That's quite a return on an investment in a college education!
Saving for college may seem like a monumental task, but you don’t need to save the entire amount overnight, and, chances are, you won't need to finance the entire expense yourself. Today, there are a multitude of loans, work programs, tax credits, and so forth designed to help put college within the grasp of nearly everyone. With a little homework, you can find all the options available to you.
Here are five sources of college funding to consider:
Grants and Scholarships
Grants and scholarships are awarded on a number of criteria, including grades, talent, heritage, race and gender. Grants and scholarships can be offered locally, statewide, nationwide and by particular colleges and universities. For that reason, it can be difficult to pinpoint all these opportunities. The Internet, school counselors and the financial aid offices of colleges and universities can provide a wealth of information on this topic. Grants and scholarships typically supplement college costs rather than cover total expenses. Therefore, it's important you take an active role in saving for your child's educational future.
Investments
Through the years, parents and grandparents have used savings bonds, zero coupon bonds and growth-and-income mutual funds to help with educational expenses. All are excellent ways to save for a college education. In more recent years, however, several new tools to help save for or offset college expenses have been introduced. All make financing a college education easier than ever before.
The Coverdell Education Savings Account (Education IRA)
A Coverdell education savings account can be established by anyone interested in setting aside dollars now to pay for future higher-education expenses. The annual contribution limit to a Coverdell education savings account is $2,000, a sizable increase over the previous limit of $500.
Once a Coverdell education savings account is established, anyone - a family member, friend or the child - can contribute to the account as long as he or she meets the adjusted gross income limits. A single tax filer can earn up to $95,000 and a married couple filing jointly can earn up to $190,000 and make full contributions. For single tax filers, the phase out range is $95,000 to $110,000. For married couples filing jointly, the phaseout range is $190,000 to $220,000.
For example, if a married couple has an adjusted gross income of $120,000, they can contribute the entire limit to an education savings account. However, if the married couple has adjusted gross income of $205,000, they can only contribute half of the limit to the Coverdell education savings account.
Eligible education expenses covered by the Coverdell education savings account included qualified elementary and secondary school expense (tuition, fees, tutoring, special-needs services, books, supplies, computer equipment, room and board, uniforms and transportation).
Corporations and other entities, including tax-exempt organizations, are permitted to make contributions to a Coverdell education savings account, but contributions by an employer are included in an employee's taxable income.
Another new alternative to saving for a college education is 529 plans.
529 plans can be established for a child or grandchild. When establishing a 529 plan, you choose from two options:
1. Prepaid tuition programs - In a prepaid tuition plan, you buy future tuition credit - at today’s prices - that is generally used at an instate school.
2. Savings plans - Under these plans, your earnings are not taxed as they accumulate, and qualified withdrawals are free from federal income tax.
Savings plans are the more popular of the two plans because they generally don't restrict students to certain colleges in specific states. Keep in mind, though, that withdrawals used for expenses other than qualified higher education expenditures may be subject to federal and state taxes and other penalties.
Tax credits
Even if you already have a child enrolled in college, help still may be available. The Hope Scholarship Credit and the Lifetime Learning Credit are tax credits that can be used to offset college tuition and fees.
The exact amount that can be claimed depends on your family's income, the amount of qualified tuition and fees paid and the amount of certain scholarships and allowances subtracted from tuition. If you’d like college to be in the future of your child or grandchild, now is the time to begin. An investment professional can give you a good idea of how much you need to put aside for a college education and which investments are best-suited to your particular needs. Then, start searching for additional financing. Remember, there's a wealth of financing for those who do their homework!


Do your homework on college grants and college savings plans