These days, college isn't just a dream; it's practically a requirement. And it's also getting more and more expensive. However, there are several options and choices available to help ensure that your children or grandchildren will be able to explore and enjoy the advantages of higher education. Some options you have are 529 Plans and Coverdell Education Savings Account.
Things to keep in mind...
The tax benefits offered by college savings vehicles can greatly affect how much you accumulate for a child's college education. Tax-free status is a powerful benefit and can make a difference in the value of an account - enabling your college savings dollars to keep pace with college education expenses.
Financial Aid Implications
Many families are afraid to save for college, thinking it will hurt their chances for financial assistance. They are unaware that income, not savings, is the most important factor in determining who qualifies for educational grants and/or loans. Since parent income and the saved assets of both child and parent are important factors in determining financial aid, it’s important to consider how the college savings vehicle chosen affects financial aid.
Flexibility and Access to Assets
What happens to your college savings if your situation changes, you have a financial emergency, or your child gets a scholarship? The answers vary based on the college savings vehicle you chose. Ownership, control of assets, and account flexibility are important factors that should all weigh in the decision-making process. College savings plans also vary in the treatment of non-qualified withdrawals, from not allowing early access to complete penalty-free liquidity.
Income Restrictions, Contribution Limits, and Other Factors
With the rising cost of higher education, it’s important to start investing early and regularly to prepare financially for college. High contribution limits allow you to save greater amounts toward college expenses, and income restrictions often dictate who can use each plan.
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