Issue link: https://read.dmtmag.com/i/698004
Summer 2016 — www.ncsf.com 25 SIX METHODS TO PAy FOR COLLEgE In general, the six basic methods of paying for a child's higher education include: a child working his or her way through school; obtaining fi nancial aid (scholarships and federal loans); paying college expenses out of the parents' current income or assets; using education funds accumulated over time; obtaining private loans; and grandparents (or others) paying college costs. The fi rst method (child pays) can work, and many successful persons have obtained a good education while working to pay their way. But this often limits the student's choice of schools and can adversely affect grades. Planning to rely on fi nancial aid (the second method) is risky, and the family may not qualify for enough. The third method (parents paying out of current income or assets) works for some, but many parents will not know if their current income and/or assets will be suffi cient until it is too late. In addition, this method is not as tax-effi cient as some strategies used to accumulate separate education funds (the fourth method). However, these strategies are not without risks. Poor investment choices could prove costly. The fi fth method (private loans) can result in a serious debt burden. Obviously, the sixth method is ideal, but it is not available to many. HOw gRANDPARENTS CAN HELP Grandparents, as well as other taxpayers, have a unique opportunity for gifting to Section 529 college savings plans by contributing up to $70,000 at one time, which currently represents fi ve years of gifts at $14,000 per year. ($14,000 is the annual gift tax exclusion amount for 2015.) A married couple who elects gift-splitting can contribute up to double that amount ($140,000 in 2015) to a benefi ciary's 529 plan account(s) with no adverse federal gift tax consequences. As an added feature, money in a 529 plan owned by a grandparent is not assessed by the federal fi nancial aid formula when qualifying for student aid. CONCLUSION. The key to effective education planning is to start planning and saving early to create future options. In addition, the use of tax-sheltered investment and savings vehicles like a 529 plan can help ensure adequate funds are available when a child enters college. © 2015 Thomson Reuters. Reprinted with permission. 2 1 3 5 6 4 EDUCATION PLANNINg continued from page 23 Spring 2016 Games: WINNERS Members participated in age category games; winners were chosen by a drawing of correct entries. aGeS 0-4 #1 – GIFT Miles Lightbourn of WI – Court 998 #2 – GIFT Cecilia Bulcher of WI – Court 998 #3 – GIFT Stephen Bulcher of WI – Court 998 aGeS 5-9 #1 – $15 Griffi n Goetz of MN – Court 543 #2 – $10 Kiley Carroll of WI– Court 998 #3 – $5 Christian Statz of WI– Court 998 aGeS 10-15 #1 – $25 Sophie Bessey of WI– Court 868 #2 – $15 Cade Statz of WI– Court 998 #3 – $10 Gavin Goetz of MN– Court 543 aGeS 16 & over #1 – $50 Teresa Morgan of SD– Court 644 #2 – $25 Janice Deininger of WI– Court 850 #3 – $15 Janice Ruda of MN– Court 1108 ank you from Court 998! " is is my son, Jackson Carroll. He won the prize for the 0-4 age group puzzle in the magazine [winter games] last time. ank you for all you do. ank you also for Kiley Carroll's second place prize [5-9 age group]." Take care, Amber Morrow