As the costs of undergraduate and postgraduate education continue to rise, families are tasked with securing and allocating financial resources to pay for their children’s education. Grandparents are also recognizing this financial challenge and are creating plans to help their grandchildren achieve this goal. For both parents and grandparents wishing to contribute, the college planning process can be difficult to navigate.
There are many questions to ask when starting this process: What is the best savings vehicle for the family? Will this savings impact the student’s financial aid eligibility? Can I fund college with gifts I make to my children or grandchildren in trust or outright? Can a grandparent pay tuition directly to a college? What if the student receives a scholarship? What if the child does not attend college? Parents and grandparents grapple with myriad priorities in the process of establishing what college savings strategies make the most sense. This contemplation is often built around factors connected to tax and estate treatment, control of the account, income restrictions, beneficiary changes, age restrictions, maximum investment amounts, complexity, protection from creditors, impact on financial aid, distribution terms, qualified expenses, flexibility for needs outside of education, contribution limits, student incentives, penalties, investment options, fees, and set up costs.
With so many variables at play, it often takes an education just to plan for higher education, and stakeholders need to feel confident that their student is getting the right academic experience at the right cost. After all, the investment in a college education can be one of the largest a family will make next to the purchase of a family home. Knowing that your family has properly planned and identified all that is available from application to graduation and beyond can be difficult when there is so much information to process.
Planning early is key
Like any financial goal, planning in advance is the key to achieving the desired outcome. Many parents and grandparents begin thinking about college planning at the time of the child’s birth, while others put if off until they have built up their financial resources. An early determination of what matters most to the donor and the pros and cons of various investment options can be a quality starting point. These efforts, when simultaneously juxtaposed against the current and projected costs of college, can help set a strategy that is best for your family.
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