MAKING COLLEGE AFFORDABLE

A college education is an investment that will pay a lifetime of dividends. For the children in your life, planning for this exciting and challenging time is something that cannot begin too soon. Many families have multiple financial goals today, such as purchasing and maintaining a home, vehicles and participating in recreational activities. Many families assume that, if necessary, their children can obtain financial aid to help cover tuition expenses and therefore do not do any serious planning regarding their children's college education. This can be a dangerous assumption to make. Financial aid generally includes student loans, which will result in a student receiving a college diploma, along with accumulated debt that must be repaid.

The years ahead are expected to produce the largest college enrollments in U.S. history. It is projected that in 2009, the biggest high school class in the history of our country will be entering campus life. This will undoubtedly create increases in tuition, as institutions will be adding additional buildings, equipment and instructors in order to handle this influx of students. Being knowledgeable about these facts should make parents and grandparents examine the methods available now that can help to ease the strain of financing that much-needed college degree.

A type of college funding plan that has recently become very popular is the 529 Savings Plan. Some of the features of these types of plans include:
flexible investment choices
no income limits - anyone can contribute
contributions may be fully or partially deductible on state tax return
contributions and earnings are not taxable if used for qualified education expenses
the owner of the account maintains control of the assets at all times
the account beneficiary can be changed to another family member if the intended recipient does not attend college. A 529 Plan can be perpetual, which means thatif a balance remains after the first beneficiary has completed college, the funds can be retained to be used for another generation of family members.
generally the assets within the plan will be considered assets of the owner(s), not
the student, which can be favorable if financial aid is being considered

Another type of college savings plan is the Coverdell Education Savings Account. The features of this type of plan include:
contributions can be made to a Coverdell ESA and a 529 plan in the same year
the contribution limit is $2,000.00 per year
contributions are not tax-deductible
contributions and earnings are not taxable if used for qualified education expenses
balance must be withdrawn by the beneficiary's 30th birthday

One final method for saving for a college education is through the use of Unified Transfers to Minor (UTMA) accounts. This particular method has been utilized by many individuals through the years since these type of accounts have fewer restrictions.
no limit on contribution amounts
control of assets belongs to the account owner, only until the child reaches legal age
wide range of investment choices
contributions are not deductible
withdrawals can be made for any purpose, not necessarily education expenses
account is considered to be owned by the student, which may be unfavorable if financial aid is a consideration

Since financial planning for a higher education is an important consideration, it is recommended that families contact a financial advisor for specific advice and recommendations.

Michele Engstrom is a Registered Representative with Raymond James Financial Services in Dover, Ohio. As the mother of triplets preparing for college in 2010, she is well versed in the topic of college funding. Contact Michele for more information at 330-343-2212 or 800-837-7276 or www.raymondjamesohio.com.

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