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Transcript of Saving for College. PICPA The Pennsylvania Institute of Certified Public Accountants PICPA is a...
Saving for College
Saving for College
PICPAThe Pennsylvania Institute of Certified Public Accountants
PICPA is a professional association of more than 22,000 CPAs working together to improve the profession and serve the public interest.
Saving for College
Start Early!• Tuition expenses are rising faster than
inflation.• If possible, start a college fund as soon as
you have kids (or even before, if reasonable).
Saving for College
Saving Options• Traditional savings account• Gifts—Tax free up to $20,000– Uniform Gift to Minors– Uniform Transfers to Minors
Saving for College
Saving Options• 529 Plans—Savings grow tax free, and
distributions for qualified expenses are also tax free– 529 Prepaid Tuition Plans– 529 College Savings Accounts
Saving for College
College OR RetirementParents often wonder if they can only save for one, should they save for children’s education OR their retirement?Most experts recommend that retirement savings take precedent.– Children can take a loan out for school or
apply for scholarships, not so for retirement
Saving for College
College OR RetirementIf you can only save for one, should you save for children’s education OR your retirement?Most experts recommend that retirement savings take precedent.– Children can take a loan out for school or
apply for scholarships, not so for retirement
Saving for College
Shop SmartBefore selecting a college or university with your child:• Look into scholarships• See what aid packages colleges offer• Be flexible—consider state instead of private
school, or suggest community college before moving to a four-year school
Saving for College
Shop SmartNegotiating a better financial aid package:• Have students to apply to colleges where their test
scores place them in the top 25% of applicants.• Contact first-choice schools if:– Aid package isn’t enough to realistically cover
costs– Second-choice school offered a better package
Saving for College
Shop SmartBefore selecting a college or university with your child:• Consider the total cost—experts recommend
students’ total loans not exceed what they’ll earn their first year after graduation. Steer students clear of costly colleges with poor aid packages.
Saving for College
Shop SmartFamilies should have a plan in before school starts:• Be clear about what parents will pay for and
what students will pay
Saving for College
Closing the GapOptions to pay college costs not covered by aid, grants, or scholarships:• Tuition payment plan—spreads the cost out over 12
months• Loans– Federal and private options• Live at home if possible• Try to graduate in 3 years instead of 4
Saving for College
CosigningWeigh pros and cons carefully:• Pro—student will likely get the loan, and have a
better rate• Con—you’re on the hook if the student can’t make
the payments after graduation.
Saving for College
TaxesCredits:• American Opportunity Credit• Lifetime Learning CreditDeductions:• Tuition and Fees• Student Loan Interest
Saving for College
Money Management BasicsWork with students to set up a budget• List sources of income• List what students might spend in a month:– Cost of books and school supplies– Meals and entertainment– Personal care items– Car expenses/travel
Saving for College
Money Management BasicsCredit card companies aggressively target college students• A credit card is a good way to build credit
and good in case of an emergency• Try using a debit card for everyday
purchases and save the credit card for emergencies
Saving for College
Money Management BasicsCredit card advice:• Beware of teaser rates• Stick with one card• Pay in full every month• Pay on time – avoid late charges• Avoid cash advance• Protect your credit history
Saving for College
Tips for StudentsIt may be a good idea to open an account at a bank near your school of choice. Locate a bank that offers free or low-fee checking for students and has ATMs on or near campus.
Saving for College
Returning to School as an AdultThe federal government and colleges base your aid eligibility on last year’s tax records. If you plan to cut your hours or stop work to go back to school, your income will obviously decrease. Bring this to the attention of the financial aid director.
Saving for College
Get Creative with Saving• Check to see if your employer offers assistance– Up to $5250 of employer-provided education
assistance is tax free• Can use 529 Plan to fund grad school or career
change education
Financial Tips for College
Resources• PICPA’s College Savings page
www.picpa.org/collegesavings • 360 Degrees of Financial Literacy
www.360financialliteracy.org • U.S. Department of Education
www.college.gov
Financial Tips for College
Questions?