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Custodial 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.

Trust — Another 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 family contribution.

If you have a child coming to college and you make more than $60,000 annually, you probably won’t 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 haven’t worked and haven’t saved they’re 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 family’s money and then don’t 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 veteran’s 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 physical needs.

A student’s junior year in high school is the best time to begin looking for scholarship information. Often people wait until it’s too late to apply. The cut-off date is usually in December during a student’s senior year.

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 tax-deductible.

KINGSRITER: The local college has a lot of scholarships available and increasingly there are scholarships to honor family members. Scholarships and grants from the government don’t 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 we’re 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 after that.

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 aren’t 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.

WHITE: Missouri, 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.

KINGSRITER: The federal government recently approved the 529 program, which is administered by the state. Sometimes they’re 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?

WHITE: Budgeting 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 tuition reimbursements.

KINGSRITER: The discipline of saving is the obvious answer here. If you don’t discipline yourself to do it — it won’t get done. I personally prefer payroll deductions for a savings account. It’s also important for young people to learn how to live on a budget while they’re 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 child’s 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?

KINGSRITER: Again, 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. That’s 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).

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