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Category Archives: Terry Evearitt Archives
College savings plan for baby: Expert Terry Evearitt
We have a nearly 2 year old and a baby due in December. My husband and I want to be proactive in starting to save for college for both of our children, but don’t know where to even start. Are there any resources you would recommend that we investigate to help us start to plan? Any information you could provide would be very appreciated!
You are wise to begin early; the “rule of thumb” in college planning is “sooner is always better than later.” College cost have increased between 6-12% annually for decades; it far out paces the cost of living increases. These increases are being noticed at all levels of society and may be slowing, time will tell. Never-the-less, costs are high and wise parents begin early.
There at three roads you can explore.
Road #1 the Pennsylvania guaranteed savings plan. Pennsylvania offers two plans. First the guaranteed plan; Pennsylvania like many states offers a method to purchase tuition credits at today’s cost and used when your child attends college. Many states have this or a variation of this program. Advantage is there are guarantees. (I like that, why put at risk our children’s education?) You will probably be eligible for less financial need based aid if you use this program; thus your scholarship chances diminish.
529 Plan – Expert Terry Evearitt (Archives)
I would like to start saving money for my child’s education. What are the benefits of using a 529 plan over just placing the money in a savings account or CD?
The simple answer to: “the benefits of the 529″, doesn’t address the complexity of the issue. The simple answer is that it may save you a little money on taxes. The way the program works is that you can invest money you already paid taxes on into the program; those funds can be put into the 529 account and if you use those funds for education you do not have to pay taxes on any growth.
The more complex issue takes longer to explain. To begin, the 529 plan was established by US congress in response to the financial services industry. The financial planners sell products and they lobbied congress to create a product they could sell. Thus, the 529 legislation was passed providing tax advantages. However, the same congressman who established the 529 also set the laws and rules for financial aid. If congress truly wanted to help you save money for college they would have excluded the 529 plans from the financial aid calculations. They did not do that; thus, you may save a few hundred dollars on taxes and lose tens of thousands of dollars in grants and scholarships. In general any college saving plans hinders you from receive financial aid, grants and scholarships. There are other strategies for saving for college that can be employed.
Where to Save College Money – Expert Terry Evearitt (Archives)
Our daughter is a junior. We have saved over $100k for college for her. Some of the money is in her name/SS #. Some of the money is in 529 plans. From a financial aid standpoint…where is the best place to have money? In her name or in the parents?
The key factor is to determine what “kind of financial aid” we are addressing. Financial aid comes from three directions inside of colleges. First financial aid based on financial need; second based on Merit (meaning academic achievement – grades, SAT scores etc.) and third aid based on Performance (such as Athletic Scholarships or Music Scholarships – where the student “performs”).
Back to the question: Assets saved for college has little to no affect on Merit or Performance financial aid; but EVERYTHING to do with financial based aid. Basically the poorer you are the more financial aid based on financial aid you will receive. Thus no matter whose name or S.S. number it is under it will count against you. It counts less if the parent owns the asset. A 529 is owned by the parent. There are ways of “sheltering assets” and if that is done the funds must be safe, easy to access, not at stock market risk, and not part of the college formula.
College Tuition Savings – Expert Terry Evearitt (Archives)
My children are 4 and 5 years old. Roughly how much should I be saving each month to pay for their college tuition in full (no loans)? Thank you
College inflation is running between 6 to12 percent annually–this is two to three times inflation for our cost of living. The total current cost of attendance at one of the 14 Pennsylvania state-supported colleges (West Chester, Shippensburg, Kutztown, Bloomsburg, etc.) is around $23,000 per year. If college inflation continues, your children will be conservatively looking at yearly costs of $50,000 (around $225,000 for a 4-year degree). Penn State University, University of Pittsburg and Temple University also receive some state aid and cost this year around $32,000. When your children attend college, the costs could be around $65,000 their freshman year (around $300,000 for a 4-year degree). If you are middle class, expect NO scholarships or grants. Historically and currently these colleges offer great assistance in getting STUDENT LOANS, but little or nothing in grants and scholarships. In fact, Congress authorized colleges to call loans “financial aid.” Thus it is common to hear colleges and our congressmen boast about all the financial aid they offer, only to discover it is mostly loans.
