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How to Pay for College Without Going Broke
Finding the money for a college education can be a daunting prospect. For too many parents, it means paying for college with money that should go to finance their retirement.
It’s a choice no parent should have to make:
- Will you rob your retirement account, and risk that someday you’ll end up depending on your children to pay for your care?
- Or will you let your kids go forward on their own, knowing they’ll be saddled with student loans they may need decades to pay off?
“I’m from the government, and I’m here to help”
Right. Over the years, the government has come up with scads of ways to pay for college—all the while ignoring a powerful solution that’s been available for more than a century. Beware, because government plans all have strings attached. They have “Gotchas!” galore.
Government “help” comes in three main flavors:
- 529 Plans are named after a section of the tax code. Once you put money in a 529 account, it grows tax-free. When the money is withdrawn for college, it’s not taxed at the federal level, and most states don’t tax withdrawals either. But every dollar in a 529 account reduces your child’s potential grant of federal student aid. And there are six other “Gotchas!” to watch out for.
- UGMAs and UTMAs let you contribute to an account in a minor’s name without setting up a trust. You can buy and sell securities in the child’s name, and any growth is taxed at the child’s rate— which is undoubtedly lower than yours. But all that liquid cash in Junior’s name again means your child may be eligible for less federal student aid. And because the money legally belongs to your child, they can spend it however they want when they turn 18. In addition, there are five other traps to be aware of.
- Loans such as Parent PLUS Loans and Federal Stafford Loans, charge interest rates as high as nearly 7%, plus an origination fee that may exceed 4% of the amount you’re borrowing. And too many borrowers end up like Diana Jackson, who had no student debt when she got her bachelor’s degree in 1982. But when her daughter graduated some 30 years later, Diana was stuck with $33,000 in parent loans. “I’ll be in my mid-seventies before I get that paid off,” says the part-time college professor. That kind of predicament, plus six other pitfalls, make traditional loans something to avoid.
Ask These Seven Vital Questions
This chart lists seven vitally important questions you should ask when considering how to pay for college:
Where to Get the Answers & Help You Need
Our college planning strategies will provide you with more flexibility and advantages than any other college savings plan. We will show you how to pay for college in the most tax-favored manner, without the risk of market fluctuations, and how you can recapture college costs to provide for the comfortable retirement that you can expect and deserve.
Click Here to Request Your Free, No-obligation College Funding Analysis Today!
