Are you planning to help your children or grandchildren with their college tuition expenses?
On June 14, 2023, Dave Herlihy, Senior Vice President of Wealth Management at Slavic401k, presented a webinar discussing saving and paying for college, student loans, financial aid and 529 plans.
Download the slide deck and watch the webinar recording above.
Saving and Paying for College Webinar: Key Takeaways
- The average cost of a four year degree at a public university is nearly $103,000 in state and $176,000 out of state. Private universities average $218,000 in total costs to obtain a degree.
- Start saving for your child’s education as early as possible, even if it’s a small amount. Consistent saving over time helps your child attend the college or trade/technical school of their choice.
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- According to the 2022 U.S. News & World Report, 43% of parents regret borrowing student loans for their children, with 75% of parent student loan borrowers sacrificing their own financial milestones to do so.
- 529 Plans – College savings accounts that allow a parent or grandparent to save on behalf of a child. When money is withdrawn for a qualified educational purpose, it is not taxed. Tax favorability varies depending on your state and the plan you choose.
- 529 Prepaid Tuition Plans – Massachusetts, Pennsylvania, Maryland, Michigan, Florida, Mississippi, Texas, Nevada and Washington offer 529 prepaid tuition plans that allow residents to pay tuition for tomorrow at today’s rates.
- Coverdell Education Savings Accounts – similar to a 529 plan, these accounts offer tax-free investment growth and tax-free withdrawals when funds are spend on qualified education expenses.
- Custodial Accounts (UGMA/UTMA)
- Uniform Gift to Minors Act (UGMA) – contains only financial products such as stocks, bonds, and mutual funds. The UGMA provides a way to transfer property to a minor without the need for a formal trust.
- Uniform Transfers to Minors Act (UTMA) – a UTMA can have financial assets and physical assets such as real estate, jewelry, and fine art.
- Custodial accounts offer more flexibility than 529 plans and are not restricted to paying education usage, but offer fewer tax benefits for parents. They are also considered as the student’s asset, and may negatively impact their eligibility for financial aid.
- Investment Accounts – this option offers freedom from restrictions on how you can use the investment, but you are subject to annual income taxes and capital gains taxes must be paid when shares are sold. They may also reduce financial aid eligibility.
- Savings Bonds – a safe investment guaranteed by the U.S. government. Qualifying savings bonds can be excluded from income taxes when used for education purposes.
- To be considered for Federal student aid, parents and students must fill out a FAFSA form annually, beginning when the student is a senior in high school. Some states, schools and colleges also use the FAFSA to award financial aid.
- Grants – do not require repayment and are typically awarded based on information provided on the FAFSA.
- Scholarships – monetary awards to pay for tuition and education expenses that do not need to be paid back.
- There are various types of student loans available through the government as well as privately that can either be subsidized or unsubsidized.
For more in-depth information on the topics above, as well as real-life examples, watch the webinar recording above.