Saving for college, whether it's for yourself, your children, or your grandchildren, requires careful planning and discipline. The average cost for tuition, fees, and room and board for a full-time undergraduate in-state college student at a public four-year college approaches $25,000/year. That figure can more than double at a private college. If you want to save money for education, here are 3 things to consider:
1. Attend a community college for the first two years. Morton College, for example, offers the opportunity for students to earn credits for basic required classes that are easily transferred to a four-year college or university. The cost savings are dramatic. Contact Student Resources for guidance in applying for the Free Application for Federal Student Aid (FAFSA), which can reward students with scholarships, grants, and loan opportunities depending on each individual's personal situation.
2. Open a Coverdell Education Savings Account (ESA). An ESA is a savings plan that offers tax advantages and nearly limitless investment options. It can be set up at almost any brokerage firm, mutual fund company, or other financial institution. Contributions aren't deductible, but earnings are tax-deferred and withdrawals used for qualified education expenses are tax-free. There are contribution limits, so it's best to start contributing to an ESA early.
3. Open a 529 College Savings Plan. Earnings grow tax-deferred, and withdrawals are tax-free when used for qualified education expenses. Every state offers at least one 529 plan, and some offer state income tax deductions for residents who participate. You're not limited to investing in your own state's plan; compare costs and other details of several plans so you can choose the one that best meets your needs. Also consider a prepaid tuition plan, which allows you to prepay tuition at today's rates. Talk with a professional so you understand limitations and qualifications for both options.
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