Saving
for College
As
an Alumni Interviewer for Georgetown University for more than 30 years,
I have seen the cost of private and public education skyrocket beyond
inflation, investment returns and increases in income. My entire
education, BSFS, JD, LL.M.(Tax), studying in Europe, living expenses
and my car cost less than $40,000 in the early 1970's. Today, one year
at Georgetown and other highly selective urban schools exceeds $50,000.
The trend is rapidly increasing costs and large burdens on the families
of students.
Students
Entering College.
It is
too late to save but not too late to consider cost-saving choices. Is
your son or daughter going to a highly selective or very specialized
school? If not, have you considered a county college for two years. The
education may not be a the level of some more elite schools, but many
states require state-supported universities to accept credit transfers
from county college students. This can be a huge savings.
Students Age
10 to 13
Time is running out for savings. 529 plans will have limited value
whether the plan is a savings or price stabilizing program. Any tax
deferred savings program will help some. Other choices are to have
grandparents, and other friends and relatives help contribute to a
529 plan. This can quickly build up some funds.
Birth through
10
This
is the time to start saving even though it may be very hard. Select a
529 plan and start contributing. Encourage grandparents to set-up an
education trust and to contribute up to $12k (per grandparent, per
child) yearly. Even if their means only allow a $2k
contribution per year, this is still a help.
This is also the time to invest
rather than merely
save.
You need assets that will grow in value to match inflation. Real
estate, stock, and annuity/insurance programs may help. |
Education
Credits
The Hope
credit and the lifetime learning credit help parents and students pay
for post-secondary education. Normally, you can claim tuition and
required enrollment fees paid for your own, as well as your
dependents’ college education. The Hope credit targets the
first two years of post-secondary education, and an eligible student
must be enrolled at least half time. You can take the lifetime learning
credit, even if you’re only taking one course.
The
Hope Credit
• Applies
for the first two years of post-secondary education, such as college or
vocational school. It does not apply to the third, fourth, or higher
years of undergraduate programs, to graduate programs, or to
professional-level programs.
• It can be worth up to $1,650 per eligible student,
per year.
• You're allowed a credit of 100% of the first $1,100
of qualified tuition and related fees paid during the tax year, plus
50% of the next $1,100.
• Each student must be enrolled at least half-time
for at least one academic period which began during the year.
• The student must be free of any federal or state
felony conviction for possessing or distributing a controlled substance
as of the end of the tax year.
The
Lifetime Learning Credit
• Applies to undergraduate, graduate and professional
degree courses, including instruction to acquire or improve job skills,
regardless of the number of years in the program.
• If you qualify, your credit equals 20% of the first
$10,000 of post-secondary tuition and fees you pay during the year, for
a maximum credit of $2,000 per tax return.
In some
cases, you may do better by claiming the tuition and fees deduction,
instead of the Hope Credit.
You
cannot take both an education credit and the tuition and fees deduction
for the same student in the same year.
Special rules, including income limits, apply to each of these tax
breaks.
These tax
credits are claimed on IRS Form
8863
Grandparents:
How can you help fund the education for your grandchildren?
New
College Aid Bill - Caps Interest Rates and may lessen loan availability
-
A
new federal law designed to make student loans more affordable could
also have a negative impact as some lenders begin to increase the costs
involved in issuing the loans. Click
here for the full
article...
|
