College Funding Ideas, Part 1 of 2

September 18, 2018
529 plan graphic

Do you have a child or grandchild that will someday attend college? Great, now go back in time and start saving a lot of money about 5 years before they were born, and maybe you will have enough by the time they attend. That’s how it feels these days when considering the cost of college and the savings required.

In my blog on student loan debt, I mentioned that the cost of college skyrocketed 213% between 1987 & 2017, so when students have to take out loans to fund their college, that debt can seem overwhelming.

But, as parents, we can help our children by trying to save money before college. There are investment vehicles that can help us do this. In this two-part post, I’m going to talk about several different ways to save:

  • 529 plans – Prepaid Tuition Plans
  • 529 plans- Education Savings Plans
  • Coverdell Education Savings Accounts
  • Custodial Accounts
  • ABLE Accounts
  • Savings Bonds
  • Roth IRAs

Some of these have tax advantages, and some don’t. Let’s Jill-splain these. I’ll talk about the first three in this post, and the next 4 in a different post.

Here is a handy-dandy chart to help:

529 plan graphic

*529 plans can do what is called “front-loading”, where a parent or grandparent can gift 5 years worth of the gifting limit contributions at one time. So, for example, in 2018, a parent could contribute $75,000 to a 529 plan per beneficiary.

**If the parent owns the account, it is treated as a parent asset. But grandparents, aunts, uncles, etc. can also open these types of accounts, and then it is ignored for FAFSA purposes.

Any opinions are those of Jill Carr and not necessarily those of RJFS or Raymond James. The information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete.

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