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A Parent’s College Savings List – Part 4 Tax & Financial Aid Implications, Misc. Items

Receiving a college education may be the single most important accomplishment that one may achieve in their entire life time.

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It’s incumbent on you to research college savings options carefully, just as you would research any investment opportunity. The following are a few of the many investment questions you should ask about each college savings option presented here:

Tax and Financial Aid Implications

What is the impact on financial aid? Is it treated as an asset of the parent (5.64%) or the child (20%) during need analysis, or as a resource (100%)?
What are the tax advantages of the plan? Do earnings grow tax-deferred? Are withdrawals tax-free? What are the gift tax and estate tax implications? Are contributions to the plan tax deductible? What is the federal, state, and local tax treatment? Are state tax benefits restricted to the state’s own plan, or does the state offer reciprocity to other state plans.
Are there any restrictions on using the plan in conjunction with other forms of financial aid, such as the tax benefits for education?

Miscellaneous Investment Questions
  1. Which investment firm manages the plan? Do they have a good reputation?
  2. Are there any other restrictions on the plan?
  3. Do you have everything in writing , stored in a safe place including any plan changes or updates sent to you by mail over the coming years?
This concludes the check-list series for parents carefully planning the future!
When it comes to affording a college education for your student these days it certainly pays to plan ahead and be vigilant.