Accounts The most common way to save for college has traditionally
been to contribute funds to a custodial account set up under the
Uniform Gifts to Minors Act, where at age 18 it is available to
your son or daughter. The problem with custodial accounts is that
the income earned is taxable, and at age 18 (in some states, age
21), your son or daughter is entitled to the money whether or not
they go to college.
option for some families has been to set up certain types of trusts
to assure that funds are used for college. These trusts, however,
have no income tax benefits and actually have been quite unattractive
because of the high tax rates for trusts.
WHITE: If parents
want to plan for college, they might consider the assistance of
a financial planner. While parents may choose to set up savings
options, they need to make sure they are not in turn penalized on
the Free Application For Federal Student Aid. More than just federal
income-tax information is required on the FAFSA; all sources of
income and investments are required for the calculation of the estimated
If you have a child coming
to college and you make more than $60,000 annually, you probably
wont qualify for free need-based aid. But if a student is
really interested in earning a degree, he or she can work and set
money aside for his or her education. The downfall is that students
are often penalized by that income because federal financial aid
is need-based. But, if they havent worked and havent
saved theyre also at a disadvantage. Some students work during
the summer and earn $4,000 to $5,000 and that puts them at an advantage
when they come to school in the fall.
Students can also [research]
scholarships. We always exercise a word of caution here because
there are companies that [take] a familys money and then dont
come through. Fastweb.com is a great Internet resource for checking
out different scholarship and other financial aid options. Students
should also check with their high school guidance counselor for
suggestions on scholarship programs. That could be anything from
PTA to the booster club, a Wal-Mart or Lions Club scholarship. Students
can check with their Assemblies of God district offices to see if
they are offering any scholarships as well.
Another option is their
local church. Students may wish to check with the A/G college of
their choice to see if they participate in any church-matching scholarship
programs. If a parent has been in the military, they should check
with their branch of service or a local veterans office. If
the student has Native American heritage, he or she should check
with the Bureau of Indian Affairs. And there is also vocational
aid available for students with certain learning disabilities or
A students junior
year in high school is the best time to begin looking for scholarship
information. Often people wait until its too late to apply.
The cut-off date is usually in December during a students
While saving and planning
is our first preference, parents who have college-bound students
who are faced with financial dilemmas may find it necessary to take
our Parent PLUS loans. While they go into repayment after disbursement,
the repayment period is spread over 10 years, and the interest is
local college has a lot of scholarships available and increasingly
there are scholarships to honor family members. Scholarships and
grants from the government dont need to be repaid. The Pell
Grant is probably the most widely known. But these days more students
are depending on loans and they are graduating with $15,000 to $20,000
loans that have to be repaid. So were trying to encourage
students to find summer work, pre-college work, and even some part-time
work during college. These are viable options to keep costs down.
Local businesses will often offer scholarships. My daughter, who
lived in a smaller town at the time, received $1,000 from a local
bank. Organizations like Kiwanis have scholarship programs. Even
extended family members may have a connection. College and high
school counselors and financial aid [officers] are key to the scholarship
process. Students and parents need to get acquainted with them.
They are a valuable resource. Good grades are also important because
they make a student eligible for [more] scholarships.
PE: What are little-known
ways parents can contribute to a college fund?
BARTON: The bottom
line is that with the credits provided, deductions made available,
and the ability to accumulate funds tax-free coupled with scholarships
and loans, a college education should be within reach for anyone.
It takes two things planning and a little work. Here are
several benefits parents can receive for helping:
Deduction A new
provision of the law that went into effect in 2002 allows parents
a deduction against your taxes for up to $3,000 of qualified higher-education
expenses. This provision is only good through 2005. Hopefully, it
will be extended.
Tax Credits "Hope"
and "Lifetime Learning" tax credits enable you to claim a credit
(not a deduction, but an actual credit against taxes). The Hope
credit is 100 percent of the first $1,000 plus 50 percent of the
next $1,000. This is only available for a maximum of two years for
each eligible student. In other words, of the first $2,000 of tuition
and fees, you will receive $1,500 back in the form of tax credits.
The Lifetime Learning credit is a little different in that it covers
20 percent of the first $5,000, and there is no limit on the number
of years you can use it. Most families will use the Hope credit
in the first two years of college and a Lifetime Learning credit
Beginning in 2002, you
can use these credits in the same year that you take a withdrawal
from an education IRA or 529 Plan as long as the distribution is
not used for the same qualified educational expenses.
Let me point out that
the education IRA, the higher-education expense deduction, and the
Hope and Lifetime Learning credits have income limitations. If your
income is quite high, you might lose these benefits. For example,
the credits are phased out between $80,000 and $100,000 of adjusted
gross income, and education IRAs arent available if you have
in excess of $220,000 of adjusted gross income. Of course, if you
have that income level, you should be able to save, and the new
529 Plan provides more than adequate opportunities since 529 Plans
have no income limits.
like other states, has a savings plan MOST. Parents can pay
into it and it is tax deferred. [But parents and students need to
be aware of any restrictions that may apply.] They can also check
with their college, because some schools have programs where you
can pay tuition in advance.
federal government recently approved the 529 program, which is administered
by the state. Sometimes theyre called tuition-savings programs.
This allows you to put money into a fund prior to the college years
and receive tax advantages. The education IRA, if started early
enough, can also be beneficial.
PE: What are some
practical steps that can be taken to save money every month to help
pay education costs?
is a key issue. Making it a priority is important. Students should
also be encouraged to put a certain amount of money aside each month.
Sometimes employers offer matching contributions or give students
discipline of saving is the obvious answer here. If you dont
discipline yourself to do it it wont get done. I personally
prefer payroll deductions for a savings account. Its also
important for young people to learn how to live on a budget while
theyre going through high school because their funds may be
more limited in college.
PE: Why is an education
at an A/G school a good value?
WHITE: I think
it is an excellent value because of the spiritual environment. You
are put with other students who care about and share common goals
and values. Also, the student/teacher ratio [tends to be] better.
I know there are some people who simply cannot afford to go to a
[private Christian] college. But, by the same token, what price
tag can you put on your childs life? And what price [could]
you pay by sending them to a public institution, as opposed to making
sacrifices so they can attend a Christian college?
a college education is a good investment. A/G colleges are a good
value for a number of reasons. State schools are not teaching values.
As recently as the 1960s, a lot of state schools still had chapel.
Thats unheard of anymore. They had people who were willing
and able to talk about values in the classes. That is seldom the
case anymore. Today Christians are made fun of when they share their
point of view at state schools. At A/G schools we have Christian/Pentecostal
faculty members who are living and modeling a Christian lifestyle.
Besides attending chapel, every student in an A/G college, regardless
of his or her major, will receive at least 18 hours of Bible and
theology. Missions and Christian service are also emphasized. There
is fairly strong anecdotal evidence that many students who attend
secular schools lose out with the Lord. At A/G colleges, students
are encouraged in their faith to "grow in the grace and knowledge
of our Lord" (2 Peter 3:18, NIV).