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Too much credit card debt? There is a way out! Call Toll Free: Complex College Funding Choices Financing & Financial Aid What do the Coverdell, Section 529, Pell, PLUS, and Prepaid terms relate to? Funding for college. If you didn't know the answer to this question you are not alone. Even CPA's and Financial Planners often have a hard time determining which is related to what, and the best avenue for maximizing the return on junior's college fund. The most important factor to keep in mind is that you can't go wrong saving money. Even if you put a small amount of money in a traditional savings account each week or month, over time that nest egg will grow. This will provide you with more options for investing it when you have clarified for yourself the pro and con of each option available to you. So start saving today, no matter how small the amount is, discipline yourself to put aside a predetermined amount on a regular basis. It can be confusing, and when people are confused, they often take no action at all. By starting out with a regular saving account you can begin to accrue interest and grown the investment while taking your time to investigate the other options. With your now growing college fund, it is time to look into the various types of funds offered. The most convenient plan may be one offered by your employer. Check with your personnel office and see what the company offers by way of educational savings plans. Often the money can be deposited through payroll deduction. The Coverdell Education Savings Accounts allow parents to deposit up to $2,000 per year without having to pay taxes on profits or withdrawals. The downside is that for wealthy families this plan can be a great tax shelter, but lower income families may find their scholar penalized with a reduction in financial aid by as much as $1.22 for every dollar saved through a Coverdell plan. Each state has established a Section 529 plan that is managed by a selected mutual fund firm. These funds, like the Coverdell, can grow tax-free. The upward limit on annual deposits is a generous $11,000 per person. This effectively confers the wealthy with tremendous tax advantages while penalizing less well off families by reducing their financial aid package by .15 cents for each dollar saved. On top of the financial penalties levied when the money needs to be used, if the money is not needed for an education the penalties will be stiffer for some families than others. The fees and tax incentives for each state is different which provides a confusing array of choices for parents to sort through. To help with the task of working through the maze of Section 529 plans Joseph Hurley published his personal research online. His website compares the plans of over 30 states. You can find his site at savingforcollege.com. To complicate matters even more, some Section 529 plan fund management firms are under scrutiny by the Securities and Exchange Commission. Investigators have found that with over $54 billion in Section 529 assets, the mutual fund industry was benefiting more than the investors. Managers, rather than steering investors toward plans with greater tax breaks, were promoting plans with higher fees. A healthy dose of skepticism is in order when a broker recommends a plan they earn commission on, rather than the best returns for clients. On the other hand, if you have no experience with investing, you can avoid some big mistakes by enlisting the aid of a broker or financial planner to guide you. Sometimes your bank will offer such a service. The biggest mistake you can make is getting so confused by the myriad plans that you don't begin a savings plan of any kind. [ Reach US | Debt Map ] Debt
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