Occasionally I hear people express the view that they will be penalized for saving for their children’s college, saying that kids whose parents did not save are getting scholarships and their kids who have savings will not. Yet the reality is that for most families, college savings does NOT hurt eligibility or financial aid. Utah’s 529 college savings plan (uesp.org) is one of the best in the country.
“The reason is an asset protection allowance in federal student aid guidelines that covers non-retirement money based on a formula. So, for example, for the 2013-2014 academic year, a family where the older parent is 52 can exclude $43,100 from a 529 plan from calculating EFC (expected family contribution). If that same family had saved $44,100, then they need only consider 5.64% of the extra $1,000 as part of their EFC.”
According to college consultant Lynn O’Shaughnessy, “You’re much better off with savings than not when it comes to college since a lot of college money comes in the form of loans.” So make a new year’s resolution to set up a regular contribution to your child or grandchild’s 529 college savings plan (and take advantage of the tax breaks, too).
Source: December 26, 2013
3 Steps Advisors Can Take to Help Clients Pay for College
By Gil Weinreich, ThinkAdvisor Editor-in-Chief Research Magazinehttp://www.thinkadvisor.com/2013/12/26/3-steps-advisors-can-take-to-help-clients-pay-for?ref=hp&page=2