Education Funding

Sound financial planning combined with effective savings tools can help you accumulate the funds you need to send a child to college. Several key factors should be considered when determining which plan is right for you:

Tax benefits - Some college savings vehicles allow for federal income-tax-free qualified withdrawals or they allow you to defer taxes on your investment until the money is withdrawn. These benefits give your assets a chance to grow faster than they would in a comparable taxable account and can greatly affect how much you are able to accumulate for college.
Flexibility - If your situation changes, you have a financial emergency, your child gets a scholarship, or your child chooses not to go to college, you may wish to change how your accumulated savings are used. Different vehicles offer various levels of flexibility.
Asset ownership - Custodial accounts allow a donor to invest in a child's name and are considered irrevocable gifts. The child has the legal right to assume control over the account when he or she reaches a certain age. In contrast, other plans allow donors to maintain ownership and control over the assets.
Accessibility - College savings plans vary in the treatment of non-qualified withdrawals, from not allowing early access to complete penalty-free liquidity. Others allow you to change the beneficiary to another family member or withdraw funds up to the amount of an awarded scholarship.
Financial aid implications - Parents' income and the saved assets of both child and parent are the two most important factors in determining financial aid eligibility. Since most financial aid formulas consider about 5% of parents' assets and 35% of a child's assets available for college, plans that keep control of assets with the parent have less bearing on your child's chances of receiving aid.
Investment control - Do you feel qualified to choose wise investments? Or would you rather leave the investment choice to a professional? College accounts offer both options.
Income restrictions and contribution limits - These factors will determine your eligibility to use a specific plan as well as how much you can potentially save. Some plans offer no income restrictions; contribution limits will vary.