Saving for College

PICPA The Pennsylvania Institute of Certified Public Accountants PICPA is a professional association of more than 22,000 CPAs working together to improve the profession and serve the public interest.

Saving for College Start Early! Tuition expenses are rising faster than inflation. If possible, start a college fund as soon as you have kids (or even before, if reasonable).

Saving for College Saving Options Traditional savings account Gifts—Tax free up to $20,000 – Uniform Gift to Minors – Uniform Transfers to Minors

Saving for College Saving Options 529 Plans—Savings grow tax free, and distributions for qualified expenses are also tax free – 529 Prepaid Tuition Plans – 529 College Savings Accounts

Saving for College College OR Retirement Parents often wonder if they can only save for one, should they save for children’s education OR their retirement? Most experts recommend that retirement savings take precedent. – Children can take a loan out for school or apply for scholarships, not so for retirement

Saving for College College OR Retirement If you can only save for one, should you save for children’s education OR your retirement? Most experts recommend that retirement savings take precedent. – Children can take a loan out for school or apply for scholarships, not so for retirement

Saving for College Shop Smart Before selecting a college or university with your child: Look into scholarships See what aid packages colleges offer Be flexible—consider state instead of private school, or suggest community college before moving to a four-year school

Saving for College Shop Smart Negotiating a better financial aid package: Have students to apply to colleges where their test scores place them in the top 25% of applicants. Contact first-choice schools if: – Aid package isn’t enough to realistically cover costs – Second-choice school offered a better package

Saving for College Shop Smart Before selecting a college or university with your child: Consider the total cost—experts recommend students’ total loans not exceed what they’ll earn their first year after graduation. Steer students clear of costly colleges with poor aid packages.

Saving for College Shop Smart Families should have a plan in before school starts: Be clear about what parents will pay for and what students will pay

Saving for College Closing the Gap Options to pay college costs not covered by aid, grants, or scholarships: Tuition payment plan—spreads the cost out over 12 months Loans– Federal and private options Live at home if possible Try to graduate in 3 years instead of 4

Saving for College Cosigning Weigh pros and cons carefully: Pro—student will likely get the loan, and have a better rate Con—you’re on the hook if the student can’t make the payments after graduation.

Saving for College Taxes Credits: American Opportunity Credit Lifetime Learning Credit Deductions: Tuition and Fees Student Loan Interest

Saving for College Money Management Basics Work with students to set up a budget List sources of income List what students might spend in a month: – Cost of books and school supplies – Meals and entertainment – Personal care items – Car expenses/travel

Saving for College Money Management Basics Credit card companies aggressively target college students A credit card is a good way to build credit and good in case of an emergency Try using a debit card for everyday purchases and save the credit card for emergencies

Saving for College Money Management Basics Credit card advice: Beware of teaser rates Stick with one card Pay in full every month Pay on time – avoid late charges Avoid cash advance Protect your credit history

Saving for College Tips for Students It may be a good idea to open an account at a bank near your school of choice. Locate a bank that offers free or low-fee checking for students and has ATMs on or near campus.

Saving for College Returning to School as an Adult The federal government and colleges base your aid eligibility on last year’s tax records. If you plan to cut your hours or stop work to go back to school, your income will obviously decrease. Bring this to the attention of the financial aid director.

Saving for College Get Creative with Saving Check to see if your employer offers assistance – Up to $5250 of employer-provided education assistance is tax free Can use 529 Plan to fund grad school or career change education

Financial Tips for College Resources PICPA’s College Savings page Degrees of Financial Literacy U.S. Department of Education

Financial Tips for College Questions?