Saving for College

There are a lot of ways to save for college, and some can be better than others. In this blog I’ll describe some of the best college savings options and what the advantages and disadvantages are.

529 Plans are education savings plans based on state. Each state has different requirements and fees so it’s important to check your states restrictions before opening a 529. There are 2 types of 529 savings plans- Prepaid tuition and College Savings plans.

Prepaid Tuition Plan- Prepaid tuition plans allow parents to lock in a tuition rate and save for a particular school’s tuition.

Advantages:

Lock in a tuition rate before inflationDoes not cover expenses

Disadvantages:

Applicable for one schoolResidency restrictions

College savings plans- These plans allow tax advantaged money to be deposited into an investment account for the beneficiary. Investment choices include stock mutual funds, bond mutual funds, and money market funds among others.

Advantages:

If you invest wisely, 529 plan can grow without making further depositsCovers any school expenses

Disadvantages:

Will reflect the stock market, so you can end up losing money

With savings bonds, the owner must be at least 24 years old (will not transfer like other savings plans) and any interest is tax free if used on qualified education expenses. The bonds must be cashed in the year you are paying tuition.

Advantages:

Disadvantages:

Interest exclusion can be gradually reducedCan have complicated rules

These are a type of custodial account created on behalf of a beneficiary for qualified education expenses. Like 529 plans, you have the option to invest you money, but unlike the 529, Coverdell Education Savings Accounts allow you to invest in almost anything.

Advantages:

Nearly unlimited investing optionsCan make tax-free withdrawals to cover private elementary and secondary education expenses

Disadvantages:

Annual contribution limitsExcise tax on excess contributions

Custodial accounts are accounts made by an adult (could be parent, grandparent, guardian, etc.) With these accounts the holder can deposit assets, money, antiquities and other income into an account for the minor to receive when he or she turns 18.

Advantages:

No penalty for education withdrawalsFirst $950 is tax-freeAnyone can contribute and there are no income or contribution limitations

Disadvantages:

Money can be used for anything (not just education) when the child reaches age of majorityYou can’t switch the account to another family member

Now that you know about the basic savings plans, here’s a tool that can help you decide which one is best. The college savings calculator can provide estimates based on interest, expected tuition cost and the number of years you want to save.

Additionally, we’ve put together a chart to help you compare college savings plans.

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3 Tips for Saving Big Money on Grad School

As a recent graduate, I say with utmost certainty that the major thing keeping me from doing masters degree right away is the crazy price tag. Well, that and I want to work a few years beforehand.

If there is one trend that has continued unabated by the economy, it is the growth of tuition costs in education. Schools have announced hikes of anywhere between 4-8% for their students to meet next year; this is a staggering jump on a product that many argue is already overpriced.

So, how can we beat the high cost of an advanced degree?

There are a number of different paths you can take toward trimming down your academic expenses, let’s go over them.

1) Consider a public (state) college instead of a private one.

I know the allure of a prestigious-sounding private school can be hard to overcome, but in reality, there are an absolute ton of public schools that offer an education just as robust, at a much lower cost. Although prices are set individually by each school, it isn’t a long shot to expect at least a 30% decrease in school costs, assuming in-state status.

In addition, online degree schools can sometimes be less expensive than private schools. Above all else, make sure the school you plan to attend has exactly the major and concentration you want for your advanced degree; don’t settle for a school that is cheap over a school that is targeted for your career.

2) Scholarships, scholarships, scholarships!

If you thought you were done with scholarship searching when you graduated with your bachelors, think again! Scholarships and grants remain the best money you can possibly get to pay for school, because, well…. you don’t have to pay it back.

There are a bunch of different websites you can use to find said scholarships, including ones like StudentScholarshipSearch.com and ScholarshipPoints.com. FastWeb.com and Scholarships.com are excellent excellent resources too. Bottom line, plan to set aside some time each week to look for free money.

3) Build your credit history beforehand.

Did you know that you can save thousands of dollars during your loan repayment period(s) if you can qualify for a low interest rate? If you are planning to undergo a graduate degree, financial planning is key to reducing your overall debt burden by the time you are finished.

If you’re interested in learning more about how to build your credit and what all the terms mean, check out Student Platinum’s credit education center.

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