Page 28 - EQ Magazine Issue #3
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COLLEGE SAVINGS RESOURCE (CONT’D)
Single taxpayers earning more than $129,000 per year
($191,000 for married couples) are not eligible, and you
can only contribute $5,500 per year ($6,500 if you’re
over age 50).
Prepaid College Tuition Plans
These plans are exactly what they sound like: They allow
you to pay for portions of your child’s college tuition
now, locking in current prices — protecting you from
exponential tuition hikes if your child is still years away
from attending college. So if tuition at Big State College
is currently $10,000 a year, a $5,000 contribution today
will buy you 50% of a year’s tuition (or one semester’s
worth) — whenever your child is ready to attend school Other Programs to Help Fund Your Child’s Education
and cash it in. That means that, if tuition at Big State These programs offer alternative ways to increase your
swells to $20,000 a year by the time your kid turns 18, college savings account for your child.
your $5,000 investment will be worth $10,000 in tuition
— still 50% of the total bill. More than a dozen states Gift of College
offer prepaid tuition plans, though some are currently This program allows other family members and friends
closed to new enrollment. Like 529 college plans, gains to give a gift directly to your 529 college savings plan.
in these plans are also usually exempt from federal taxes It’s free for you to register, but there is a 5% processing
fee (up to $15 per transaction) when you receive a gift.
Coverdell Education Savings Account You create a profile for your child, and your family and
Similar to 529 college plans, a Coverdell ESA is generally friends can give a gift that way. Instead of giving toys or
tax-advantaged if the money is used to pay for clothes for birthdays, holidays, or other occasions, ask
educational expenses. And, like a 529, it’s also loved ones to make a gift this way, as it can make a
considered your asset — not your child’s — so it will more lasting impact on a child’s life. Visit
have less impact on your child’s chance of getting GiftofCollege.com for more information.
federal aid. Unlike a 529, Coverdell ESAs can be used to Upromise
cover any educational expenses, including K-12 costs Register for a free account on Upromise to earn cash
such as private school tuition. back for college on shopping and dining. You can earn
money by registering your credit cards, loyalty cards, and
However, there are some limits: You can only contribute grocery cards, and then receive cash back on eligible
$2,000 per year per child, and eligibility starts to phase purchases.
out for couples earning more than $190,000 a year
($95,000 for singles). Funds not used by the time your Anytime you’re shopping online, simply start out on the
child is 30 may be subject to taxes. Upromise website, click through their links, and you’ll be
instantly earning cash back on a percentage of your
UGMA and UTMA Custodial Accounts purchase. You can then link your Upromise account to a
These types of accounts, where financial gifts to a minor 529 college savings account or to existing Sallie Mae
are held in a custodial account until the child reaches student loans.
adulthood, offer another option for saving for your
child’s education. LEAF College Savings
Similar to GiftofCollege.com, Leaf also offers family and
They offer some tax benefits, but fewer than 529 plans. friends a way to give a monetary gift toward your child’s
And unlike the other saving options, these types of
accounts can also be considered your child’s asset, not education. They pick the amount of the gift card and
yours — which means they can affect the amount of send it to you via mail, Facebook, or email. Then, you
federal aid your child qualifies for when filling out the simply redeem the gift by entering the number on the
FAFSA. One more thing to think about: The money card. That gift can be transferred to any 529 college
belongs to your child, so at age 18 or 21, he or she can savings plan.
use it to pay for college like you imagined… or for
something else entirely.
27 | www.equitymovement247.com
