College Planning Doesn’t Have to Be Overwhelming

The price of education is enough to make any parent's stomach turn.  Tuition, accommodation, board, and fees add up quickly.  However, most families are unaware that they do not have to bear everything alone.

 There are several funding options available, ranging from proactive savings strategies such as 529 college savings plans , to federal and state grants to direct aid from institutions.  The goal is to know what is available and to have a strategy in place.  When you do, the entire process feels less stressful and more manageable.

Start With What You Can Control: Saving Smart

Two of the most powerful tools for families are 529 plans and Coverdell Education Savings Accounts (ESAs):

• 529 Plans: These tax-advantaged accounts allow money to grow tax-free while also providing tax-free withdrawals for qualified expenses including as tuition, books, and even K-12 tuition.  Many states even provide a tax discount or credit for contributions.
• Coverdell ESAs: A similar concept, but with lower yearly contribution limitations ($2,000 per child per year).  The huge plus?  They can be used to cover a larger variety of K-12 expenses than just college.

When used early, these accounts allow compounding to do the heavy lifting.  Even small donations can add up over time, reducing the need for high-interest loans in the future.

Don’t Forget About Education Tax Credits

Most families don't realize that the IRS gives tax breaks to help with college costs.  They're called education credits, and they can significantly reduce your tax liability.

• The American Opportunity Tax Credit (AOTC) provides up to $2,500 a year, per eligible student, for the first four years of college.  Even better, a portion of it is refundable, so you could get money back even if you don't owe taxes.
• The Lifetime Learning Credit (LLC) provides up to $2,000 per year, per tax return.  It encompasses a broader spectrum of education, such as graduate courses or part-time classes to help people improve their skills later in life.

Is there a catch?  You cannot claim two credits for the same student in the same year.  Planning is essential in this situation.  Choosing the correct one can result in thousands of dollars saved.

 These credits do not replace FAFSA or grants, but rather supplement other forms of aid.  If you currently have a 529 plan or Coverdell ESA, combining them with the correct credit can increase your savings.

 Translation: if you pay your own tuition, don't leave money on the table for the IRS.

FAFSA: The Gateway to Financial Aid

FAFSA stands for Free Application for Federal Student Aid. It's the form that gives you access to practically every significant type of student aid:

• Federal Pell Grants (free money you don't have to pay back).
• State-based help, such as Cal Grants in California.
• Work-study programs allow students to earn money while in school.
• Federal student loans with lower interest rates and flexible repayment options
  
  

This year's FAFSA application period begins on October 1 Filing early is important since several aid programs—particularly state grants—are first-come, first-served.

Beyond FAFSA: Other Funding Families Miss

• Colleges frequently award scholarships and grants.  Filing the FAFSA usually gets you considered automatically.
• Every year, private scholarships offered by NGOs, corporations, and community groups go unclaimed.
• Employer tuition aid programs may be accessible to both students and parents.

Myth vs. Fact: FAFSA & College Funding

What If Grad School Is on the Horizon?

If graduate school—law, medicine, MBA—is involved, the rules change:

• The new One Big, Beautiful Bill Act tightens federal borrowing caps, so take advantage of all available scholarships and assistantships.
• Fellowships and research assistantships can cover a significant portion of tuition.
• Employer tuition reimbursement may make advanced degrees more affordable.
• Income-driven repayment plans can help you manage your debt after graduation, but only if they are properly set up.

Your College Funding Action Plan

You’ve Got This

Without a plan, the cost of college can seem overwhelming.  However, it is completely feasible to make higher education cheap with the correct combination of proactive saving (529s, Coverdells), targeted help (FAFSA, Pell Grants, school-based programs), and prudent borrowing.

What's the best part?  You don't have to work things out on your own.

Get in touch with us right now to create a stress-free, transparent, and personalized college funding plan that works for your family.