2. Price of College
College prices have been increasing
exponentially
Forecasted to continue to increase at around
6-8% per year
Today 18 years from now
Private College $134,600 $323,900
Public University (In State) $39,400 $94,800
Projected 4-year Tuition and Fees
Source: http://www.savingforcollege.com/tutorial101/the_real_cost_of_higher_education.php
Tuition Inflation
3. Long-Term Savings Plans
Best to start early…really early
Make regular contributions
Every bit counts
Put gifts towards account
4. Plan Options
529 College Savings Plan
Coverdell Educations Savings Account
UGMA and UTMA
Prepaid Tuition Plans
5. Plan Features
For most plans…
Income from the fund is tax exempt
You have the option to transfer the fund to another
beneficiary
There are low financial aid impacts
6. 529 Plans
Large lifetime contributions
No limit on yearly contributions
Monthly minimums: $25
Age-based plans
State tax deductions
Low financial aid impact
7. Income limits – max $220,000 per household
Yearly contribution limits - $2,000
You control your own investments
Often have lower fees than 529 plans
Can be used for K-12 expenses as well
8. UGMA and UTMA
Minors cannot own equity or bonds in most states
Provides a way around this
Fewer Income tax breaks
Kiddie tax
No restrictions on how the child uses the fund
High financial aid impact
9. Prepaid Tuition Plans
You essentially pay the tuition price today
Sources
State
Individual Universities
Private College 529 Plan
State tax deductions
Drawbacks
No flexibility (plan beneficiary can change)
Not as guaranteed as advertised
Do some thorough research
10. Who’s
Eligible?
Tax Benefits Investment
Control
Risk Transferable Qualified
Withdrawals
Financial
Aid
Impact
529 Plans No
Restrictions
State tax
deductions up
to $20,000;
Withdrawals tax
free
Set options;
you can
choose risk
level
Market risk
based on
diversified
selections of
plan
Yes All undergrad
and post-grad
expenses
Low
Coverdell $220,000 max
yearly
household
income
Complete
income tax
break
You control Market risk
based on
your
selections
Yes All K-12,
undergrad, and
post-grad
expenses
Low
UGMA and UTMA
No
Restrictions
Income tax
breaks only up
to $1000
You control Market risk
based on
your
selections
No No limitations 20-25% of
value
Prepaid Tuition
Plans
No
Restrictions
State tax
deductions up
to $20,000;
Withdrawals tax
free
Lump sum
invested by
fund manager
No market
risk; fund
failure is
possible
Yes Select college
tuition
Low
11. Savant’s Approach
Savant favors 529 plans
Heavy focus on fees associated with the plan
529 Plan Calculation Test
12.
13.
14.
15. Back to my Situation
Currently hold a UTMA plan
Possible financial aid consequences
All stocks and mutual funds
Could switch to Coverdell
Roth IRA loophole
You can take money out of a Roth IRA for
education
