Saving for College
People who earn college degrees, on average, earn considerably more money over their lifetimes than those who don't. With this in mind, saving for your child's college education can be one of your best investments.
The cost of attending a typical public or private college may seem overwhelming, especially when you consider college costs are generally increasing faster than the rate of inflation. The sooner you start saving for your child's education the better. But how much? Our college calculator can help.
[Top] Financial Aid
Another way to ease your financial burden is to look into financial aid. Scholarships, loans and grants are available from federal and state programs, university-sponsored programs and financial institutions. Your school's guidance counselor or your college's financial aid office has more information. You can also check out resources on the web, including http://www.finaid.org/ and http://www.schoolguides.com/.
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[Top]Tax Payer Relief
The 1997 Taxpayer Relief Act, as amended by the 2001 Tax Act, also provides ways to reduce college costs:
- College Tuition Credit -- Low- and middle-income taxpayers can claim the HOPE Scholarship Credit for tuition costs incurred during a student's first two years at a college, university or vocational school. A Lifetime Learning Credit is also available.
- Education Individual Retirement Accounts (IRAs) -- Taxpayers may open education IRAs to pay the higher education costs of children who are designated trust beneficiaries. Annual contributions, which must be made in cash, are limited to $2,000 and are subject to phaseout. No contributions are accepted after the beneficiary reaches age 18.
- Interest on Education Loans -- A limited deduction, available to non-itemizers, is allowed for interest paid on qualified education loans. The maximum deduction is $1,000.
- IRA Education Expense Withdrawals -- Premature distributions from an IRA used for the qualified higher education expenses of the taxpayer, taxpayer's spouse or taxpayer's children/grandchildren are exempted from the 10 percent tax on early withdrawals. Certain reductions to the education expenses apply.
This information is of a general nature and not intended to address circumstances of specific individuals or entities. You should consult with your own tax advisor before acting on any information presented on this website.