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How You Can Save on College Textbook Expenses

Posted on Aug 29, 2012 with No comments

Aug 29, 2012

The college session is approaching and it is that time when you need to spend a lot for the tuition fees, textbooks, and even food and lodging expenses. College textbooks can be pricey and the expenses of buying them can eat up a considerable portion of your college budget. However, there are ways to save on college textbook expenses. Just go through the following points and see which of them are most feasible for you.

1) Comparison shopping

Comparison shopping will typically help you save money on your college textbook expenses. There are various websites such as eBay, Amazon, Bookfinder, Bigwords, and TextbookPriceComparison that sell books online. By surfing these sites, you will be able to check prices and comparison shop. If possible, note down ISBN numbers of books from the campus bookstore or college library and use them for comparison shopping. Bestbookbuys is a popular comparison website for college textbooks.

2) Go for E-books

If you are comfortable with studying e-books, then go for them. A host of useful college textbooks are available online in the form of e-books. Most of them are available free of cost so you can download them without even spending a single penny. There are sites like Pearson Education and McGraw-Hill Education that frequently offer e-books on higher studies. CourseSmart offers e-books at considerably affordable prices.

3) Visit the college library

Don’t purchase all the books that you are instructed to purchase. Instead, go to the college library and see whether it lends you the books you need. Try to take notes from the college textbooks and photocopy their important pages.

4) Go for textbook rental system

Many college textbooks are now available on rental. So, by paying a small amount of money, you can read the college textbooks of your choice and keep them for a certain period of time, for example for the whole semester. Chegg and Book Renter are popular textbook rental sites. Follow social media networking sites like Facebook to get attractive offers.

5) Look for used textbooks

Used textbooks often come at a significantly cheaper price than new textbooks. Therefore, you can save a lot of money on your college textbook spend. You can look for open-source and subsidized textbooks as well.

6) Swap with your classmates

Swap the books that you have with the books that you don’t have with your classmates. This is also a surefire technique to save money. is a site which offers opportunity to swap books.

Author Bio: Jane is a well-recognized blog writer. She has been linked with She also provides effective tips on small business, college financing, payday loans, retirement plans and moneymaking.

Got further questions? Catch me on twitter and DM me @529SavingsPlans or e-mail me at 529CollegePlans at Gmail.comWant to be heard? Leave a reader comment below.

Contribute to a 529 Plan Using a Payroll Deduction

Posted on Aug 28, 2012 with No comments

Aug 28, 2012

Contributing to a 529 college savings plan is the best way to save for your child's higher education. Doing it on a regular basis is sometimes hard because we forget or use the money for another expense. Finding a way to automate the process is crucial to saving regularly. A good way to make it automatic is to setup a payroll deduction at your place of work.

Many people do not even know they can do this with their payroll check. Just like you have your 401(k) and other deductions taken from your check every pay period you can also have your 529 contribution sent to your plan. All you need to do is fill out a form and give it to your human resources department or payroll office.

The deduction you set up continues until the employees cancels it. If a $25 contribution is set up from biweekly paychecks when a child turns 2, he or she could accumulate $10,400—not counting any earnings by his or her 18th birthday. The hardest thing about contributing to a 529 plan is doing it on a regular basis. Some people are very good and organized about making that monthly contribution but many people end up forgetting. By making it automatic you have one less thing to think about in your busy life.

If someday you need to cancel the deduction to a 529 plan then all you need to do is contact your payroll office or human resources department and tell them you want the deduction cancelled. But be prepared it could take one or two pay periods for the order to take place.

A payroll deduction is the most painless way to save money toward a 529 plan. After a while you won't even notice the money being withdrawn.

Got further questions? Catch me on twitter and DM me @529SavingsPlans or e-mail me at 529CollegePlans at Gmail.comWant to be heard? Leave a reader comment below.

College Students & Online Gambling

Posted on Aug 26, 2012 with 3 comments

Aug 26, 2012

For most people, gambling is usually harmless entertainment. But for a growing number of college students, gambling is becoming more than fun. For some, debts rise, they drop out of school, have trouble paying rent and are using up their financial aid to pay for their gambling.

According to a combination of national studies, about one in 20 college students have a problem with their gambling (Shaffer & Hall, 2001). Is the problem something that students eventually grow out of, or is the high rate of college problem gamblers due to all of the recent trends?

While the cause is unknown, there are some important things we all need to know about this issue. College students need to have tools on how to gamble responsibly. An estimated 5.6% of college students are problem gamblers (Shaffer, 2001). This is more than double the rate of problem gambling among the overall adult population.

A popular type of gambling among young adults is online slots. Online slots players, compared to other types of gamblers, are more likely to gamble on the Internet. From poker sites to sports betting sites and more, online gambling is easy to find and makes billions a year and can be accessed just about anywhere. But why are so many people bothered by the idea of online gambling?

Some concerns

  • There's no limitation on availability. At home, in pajamas, it could hardly be more available. 
  • There's no limitation on time. People playing at home can play hours and hours, any time of day or night, before stopping. 
  • There's little limitation on money. With credit, a whole lot of money can be won--and lost--before stopping. 

Things students need to keep in mind

You can lose your money. Online gambling operations are in business to make a profit. They take in more money than they pay out. Because online gambling businesses are not located in the United States, you don't have legal protection to get your money back.

Online gambling can be addictive. Because Internet gambling is a solitary activity, people can gamble uninterrupted and undetected for hours at a time. Gambling in social isolation and using credit to gamble may be risk factors for developing gambling problems.

Tips for Responsible Gambling

  • Gamble for fun. 
  • Think of the money you lose as the cost of entertainment. 
  • Set a dollar limit and stick to it. 
  • Set a time limit and stick to it. 
  • Accept losing as part of the game. 
  • Don't borrow money to gamble. 
  • Don't let gambling interfere with family, friends, or work. 
  • Don't "chase" (gamble to win back losses). 
  • Don't use gambling as a way to cope with emotional or physical pain. 

Got further questions? Catch me on twitter and DM me @529SavingsPlans or e-mail me at 529CollegePlans at Gmail.comWant to be heard? Leave a reader comment below.

Are Prepaid College Plans Risky?

Posted on Aug 24, 2012 with No comments

Aug 24, 2012

529 college savings plans come in two flavors. The first is an investment which typically consists of mutual funds. The growth is based on the market performance of its underlying investments. This growth is affected by market conditions and economic cycles so the the plans offer no guarantee of growing into an amount of money able to meet your college goals. On top of that you may even lose principle. The upside to this plan is you could see substantial growth if market conditions and your investment choices allow.

The other type of 529 account is a prepaid college tuition plan. Prepaid college plans allow you to purchase tuition credits at a rate that is fixed today to be used in the future. That “fixed” rate is usually higher than the current tuition rate, but would be much lower than the expected tuition by the time the child enters university. The benefit of this plan is your paying for your future college credits at today's lower rates.

The risks of prepaid college plans.

At one time 20 states offered prepaid college plans, today only 12 still do. The problem lies with state budget shortfalls and poor investment returns. When problems arise the first thing states do is close the plan to new investors. The rising costs of college tuition only adds to the problem.

Ohio closed their prepaid college plans to new enrollment in 2003 because of forecasted shortfalls because of declining investment returns and a rise in college tuition. Trying to make up the gap the state choose to invest in more riskier investments. The bet didn't pay off and they lost more money.

The second risk to prepaid college plans is they may not be guaranteed. Many consumers believe that because the plans are run by the states that the state will stand behind them. This is not necessarily true. Only five states truly guarantee their plans. Massachusetts, Florida, Mississippi and Washington guarantee their plans through the full faith and credit of the state. The Texas plan is also state-guaranteed, through the state universities and colleges.

Plans run by the states of Pennsylvania, Nevada, and Michigan are only backed by assets in the trust. Plans in Maryland, Virginia and Illinois require varying degrees of legislative action for the state to pay back investors in the event of a funding crisis, meaning that it may take consumer action if legislators are reluctant to bail out the state’s tuition plan fund.

There are no easy answers to this problem. But being aware of the risks will help you make better decisions. Seeking advice from a good financial advisor is always in your best interest.

Got further questions? Catch me on twitter and DM me @529SavingsPlans or e-mail me at 529CollegePlans at Gmail.comWant to be heard? Leave a reader comment below.

The One Mistake That Will Kill Your College Savings Plan

Posted on Aug 22, 2012 with No comments

Aug 22, 2012

In our lives, it seems we are always getting ready for some future event. Preparing for your job, home, family, and your retirement seems to take up a lot of our time. But when we start early we can be successful and accomplish our goals. But sometimes we forget or procrastinate and that's when problems surface.

One of those responsibilities many parents put off is saving enough money for your child's college education. The kids seem to grow up so fast and the years just fly by. I have seen my own children grow up so fast that soon will be off to college. Saving money for that reason needs to take a priority, but many of us just put it off until the amount to save is so large that if only we started when they were born, we could of done so much better.

What's the cost of waiting?

I went to and used their college cost calculator. I entered as an example a child that was 10 years old. The results I got back were I needed to save $970 per month for the next 8 years. This was based on a 7% after-tax rate of growth each year. It was a pretty shocking amount of money I needed to save. But waiting till till the child is 10 to start investing was the reason the reason the amount was so high. With only 8 years of savings, an account growing enough seemed an impossible task. This is why many parents freak out and don't save enough or not at all.

If you don't wait.

I went back to the calculator and entered the number for starting to save the day the child was born. The calculator told me to save $602 per month and after 18 years, with 7% growth, I would have $312,166 after 18 years. Though with these results I could have enough to send the child to med school.

The take away

Saving for college for your child's education is a race that takes 18 years to complete. It shouldn't be a suprise when you notice the children are 10 years old. In our example, I agree the numbers are pretty high and the average family can never hope to save that much every month. But you do need to save an amount of money every month. But the key is to start early. With an 18 year time frame you have growth on top of growth on your side. 

If you have children, right now is the right time to start saving. Even if it's only $50 per month, after 18 years with 7% interest you would have almost $8,000. If you waited till the child was 10 to start investing you would have 25% less money in your account. Don't wait, start saving today.

Got further questions? Catch me on twitter and DM me @529SavingsPlans or e-mail me at 529CollegePlans at Gmail.comWant to be heard? Leave a reader comment below.

5 Signs Students Have Out of Control Debt

Posted on Aug 21, 2012 with No comments

Aug 21, 2012

It is just alright to take debt once in a while. There are inevitable instances when individuals have to get some loans to be able to cover necessary and emergency costs. Cash shortage is quite common. That is why there are many lenders in business. They intend to reach out and extend financial help to those in need of money. But lenders do so with profits in their minds.

Most debts incur interest payments. Nothing can hinder or prevent you from taking as many debts as you want. However, you should always consider your income and capacity to repay. Debts will have to be repaid with interest and other charges. That is why the longer those stay, the more expensive they become.

Many consumers now suffer from debt troubles. Debts may pile up until they reach and exceed a person’s financial threshold. Those can already be beyond control. You have to make sure your debt situation does not reach uncontrollable stage. Are you having out-of-control debts?

Here are five signs.

1. You are spending more than your income.

If you notice that you are spending more than how much you earn in a month, you are definitely losing a firmer grasp on your personal finance. You may figure this out by creating a personal or household budget. You can easily compute your income and deduct all your expenses from it. If the end figure is negative, you are getting out of control in your spending habits.

2. Getting multiple calls from different creditors.

Are you haunted by numerous phone calls from various creditors? It is a clear indication that your debt situation is in trouble. You may not have to avoid answering those calls. The collectors are just doing their job. Take the situation as a wake-up call. You may immediately obtain a debt consolidation loan or get into debt settlement agreements to eventually get rid of your financial obligations.

3. Taking additional debts.

Debt consolidation is like taking another debt to pay outstanding debts. Other than that, if you are making new debts just to cover your spending, you are getting out of control. Are you charging most of your expenses on your credit cards? You must assess your expenditures. Try to resist the urge to spend using your plastic cards. Live practically and frugally, at least for the meantime.

4. You become a minimum payment payer.
If you are currently paying only the minimum payment required by your credit cards and other debts, you are in a serious financial condition. You may not have enough money to pay more than minimum required. It may mean you have spent beyond your means. Making minimum payments will never help you get out of debt. Again, the longer a debt stays, the costlier it gets because of interest payments.

5. Your debt keeps on getting bigger.

Do not be surprised that even if you have minimized your spending, your credit card and debt balances keep on growing. That happens when you only make minimum payments each month. The interest rates make your balances grow further. This also means you have exceeded your limitations. Slow down and try to settle your debts even if slowly. While you are at it, try not to overspend again.

Andrew has been blogging about debt management for over 4 years specializing in credit card debt consolidation. Andrew holds a BA in Business Administration and is a regular contributor in personal finance forums.

Got further questions? Catch me on twitter and DM me @529SavingsPlans or e-mail me at 529CollegePlans at Gmail.comWant to be heard? Leave a reader comment below.

A Roth IRA for College Expenses

Posted on Aug 19, 2012 with No comments

Aug 19, 2012

The only other financial challenge you have in your life besides saving for retirement is saving for college. Certainly, saving for retirement allows you the benefit of a long time frame. Saving for college, in necessity, cuts your time frame to am intensive few years. Balancing and trying to both tasks well is a challenge.

One way people do both is by using a Roth IRA. A Roth has a rule where you can withdraw funds for college expenses. You may already have a 401k at work and are currently fully funding it. As a good saver you also have a Roth IRA. With retirement funded you know want to move on to college saving.

After pursuing your investment options, you decide it would be a good idea to use your IRAs to pay for college expenses.

Saving for college with an IRA

You may not even have an IRA yet or even a more traditional form of college saving, a 529 plan. One of the nice things about an IRA is the flexibility of the accounts. You can use them to pay for retirement, or you can use them to pay for what are called qualified education expenses.

Roth IRA can be used for higher education expenses

You can use an IRA for college expenses because of the generous exception rules when making withdrawals before the normal no penalty age of 59 1/2. If you do not follow the IRS rules strictly you will be subject to penalties. If you want to tap your IRA before 59 1/2 the exception are as follows:

  • You are disabled 
  • You use the distribution to pay certain qualified first-time home buyer expenses 
  • The distributions are part of a series of substantially equal payments 
  • You have significant unreimbursed medical expenses 
  • The distributions are not more than your qualified higher education expenses, which would include college / university costs 

If you’re only removing enough money to pay for qualified higher education expenses, then you don’t pay any tax penalties on the monies removed. But what exactly are qualified higher education expenses?

What are qualified education expenses?

Qualified higher education expenses include tuition, fees, books, supplies, and equipment required for enrollment or attendance at an eligible educational institution. An eligible education system is any college, university, vocational school, or other post secondary educational institution that is eligible to participate in a student aid program administered by the Department of Education. This definition includes nearly all accredited public, nonprofit, and privately owned / profit-making post secondary institutions.

Who can use an IRA for education expenses?

The tax law says eligible individuals include yourself, your spouse, your children, your spouse’s children, your grandchildren, or your spouse’s grandchildren.

Other benefits to using a Roth IRA for education expenses

  • accounts grow tax free. 
  • you can shelter retirement accounts when you apply for financial aid. 
  • you have personal control to either use the funds to pay for college or retirement. 

If you decide to use this strategy for college financing do not wait to long. IRS rules state that you need to hold the IRA for at least 5 years before withdrawing funds.

Got further questions? Catch me on twitter and DM me @529SavingsPlans or e-mail me at 529CollegePlans at Gmail.comWant to be heard? Leave a reader comment below.

Why Students Default on Their Loans

Posted on Aug 18, 2012 with No comments

Aug 18, 2012

A recent survey by the Project on Student Debt revealed in 2010 the average college student graduated with $25,025 in student loan debt. At this level of debt and higher students did not realize the difficulty they would have paying back their loans. They were concerned that by continuing with college in graduate degrees would only put them in a worse position for paying back their loans.

When taking on student loan debt the last thing on a students mind is how they would be able to pay back the money they borrowed. The National Consumer Law Center has pinpointed several factors that can lead to a student loan default.

Who defaults on student loans and why

According to the report, the major reason for default is the student has not completed their field of study and has stopped attending school. The survey revealed that the students that were in default, only 47% had finished and graduate. his showed that 53% of the student in loan default never finished their degrees.

Students that attended for profit colleges have the highest two-year default rates. Of students that defaulted, 65 % of the were from public colleges.

A lack of knowledge concerning loans and defaulting.

In general, the center found that many individuals who defaulted on their loans did not fully understand the state of their finances. About 24% of individuals said they did not know they were in default when they sought legal assistance, while 65% said they did not remember being contacted before they defaulted.

Additionally, the survey found that about 47% of students believed they should not have to repay their student loan debt, usually because of problems they had with their schools. About 90% of these individuals attended a for-profit institution. For this reason, the center believes colleges should be held accountable for poor student outcomes, while degree seekers should be given better, clearer information before applying for loans.

Got further questions? Catch me on twitter and DM me @529SavingsPlans or e-mail me at 529CollegePlans at Gmail.comWant to be heard? Leave a reader comment below.

Paying Cash or by Credit Cards: Benefits and Drawbacks

Posted on Aug 17, 2012 with No comments

Aug 17, 2012

One should pay careful attention while evaluating the option to pay either by cash or credit card. Both the options have their own merits and demerits.

Benefits of paying by cash

Various studies have shown that one would be careful to spend lesser amount when he opts to pay cash. The mere sight of his cash moving away from his wallet make one to think twice before parting with his cash for some impulsive purchases.

However this approach may not be applicable when you use your credit card for making payment towards essentials such as gas or cell phone as you have to necessarily incur such expenses every month.

If one has surplus cash, it would be better to pay off the credit card obligations before the due date. Since card companies charge 15% interest, the card holder can’t find a suitable investment avenue that would generate such high return consistently.

Some people get lured by rewards points offered by credit card companies. However if he skips payment towards his credit card obligations even once, his overdue interest might completely wipe out the entire accrued reward point benefits.

Drawback of paying by cash

When you use cash for payment, there are chances of your losing cash during transit. Ideally for large value purchases, one can advantageously use credit cards as they offer better security against theft.

Benefits of paying by credit cards

If one is certain to pay off the monthly dues towards credit card obligations in full, he should opt for credit cards, as these cards provide additional benefits such as reward points, purchase protection etc.

Similarly if he is certain to meet his monthly credit card obligations in time, he would ideally derive extra grace period benefit whereby he may be required to make card payments after say 30 days, based on his billing cycle. Thus he can effectively put his cash to earn some extra bit of interest during such grace period.

Paying through credit card would also help you to constantly track your monthly expenses. Most of the card issuing companies provides ‘expenses pie chart’ wherein you can easily ascertain and track the expenses incurred for various purposes such as food, electricity, travel etc. This tracking facility would thus infuse a better financial discipline.

Drawback of paying by credit cards

One of the major drawbacks of paying by credit cards is that one might skip full payment to the card issuing company. This would effectively involve availing funding against a credit card. This approach would turn out to be the most costly proposition as the credit card companies charge substantial interest at 15%.

Thus if one consistently pays up his credit card obligations in full every month, opting for credit card payment would be a better money management technique.

Allan is a regular writer and contributor in the personal finance community. Over the years, he has written numerous articles about debt, savings accounts and credit cards. Allan holds a BA in Business Administration with a major in Finance.

Got further questions? Catch me on twitter and DM me @529SavingsPlans or e-mail me at 529CollegePlans at Gmail.comWant to be heard? Leave a reader comment below.

Six Essential Tips to Help You Qualify for Financial Aid for College

Posted on Aug 15, 2012 with No comments

Aug 15, 2012

How to qualify for financial aid for college is a dilemma that bothers high school graduates, college students, let alone their parents. That is really because university education can cost a lot and it's also not a thing that everybody is able to afford to pay for. A lot of kids who wish to acquire an undergraduate or perhaps a Masters Degree generally look for financial aid for college students so they could continue with their school work.

The sad point regarding it is that not every person who applies for federal financial aid for college, or privately-endowed student financing come to think of it, gets what they ask for. It's not only because the competition for grants is tremendous, but it is at the same time because people getting this assistance don't totally appreciate how the appropriate method to how to get financial aid for college.

There are plenty of places you'll be able to look to in relation to how to qualify for financial aid for college, and the following are the six most valuable guidelines which will help you.

Read on and find out more.

The primary suggestion that you ought to look at is to seek the recommendations of a financial aid advisor. A financial aid advisor ought to realize the ins and outs of the process, especially if what you're attempting to get is a federal aid. This financial aid advisor will draw you through the process to make your application more successful, so it will be highly important that you get one and work closely together with them.Another necessary word of advice you need to remember is to keep tabs on the deadlines and move quickly.

Virtually all programs offering financial aid for college students, especially those run by the federal government, are awarded on a first-come, first-serve basis. The faster you present the documents and requirements for the federal grants you're applying to, the higher your probabilities of you getting that funding for school you would need to resume your studies. It's adviseable to reduce your readily available resources.

If it is your child who is going to go to college or university soon, you should start converting whichever holdings you have available a minimum of a couple of years just before your kid would need to request for school funding. If the federal agency that is granting the aid notices that you have the bucks to send out your child to college by your own capability, you will end up hurting your child's probabilities for obtaining that support. Why do you have to limit your readily available assets two years prior to application? That is because each and every sale you will be making within that two-year period ahead of the application will probably be viewed as capital gain, therefore an income.

Lowering your earnings can also help. Do you have any sort of extra income or perks moving your way in the couple of years before you can put in your FAFSA? See if you possibly could defer them until after your FAFSA has been approved. Do you have any money originating from ventures or savings in the bank? Sell off or dispose of what investments you will be able to so the government is not going to realize that you've got cash to send your kid to university.

As you are liquidating your belongings, try putting money into your residence, a 401K or 529 plan. The only financial savings that the federal government will never check out as they review your kid's qualifications for assistance to fund their higher education are financial savings needed for your primary home, your pension or a 529 account. Hence, in the act of clearning your resources and downplaying your revenue, you could make extra payments on your property loan, get a new residence, or place funds in a 401K or any retirement account. You must also place some cash in a 529 account.

If you can, set that 529 policy in your child's grandparents' name and nominate your child as the beneficiary.And lastly, although not the least, use up the enrollee's savings. The government considers that 35% of the student's personal funds must be employed to funding their college education right before they could be given assistance.

Consequently, to add to the prospect of securing that assistance successfully, your kid must use up that cash they have got in their name prior to asking for federal financial aid for college. It could possibly be for a brand new computer or things they may require for their dorm room or apartment.These are only a number of recommendations you may work with to acquire the financial aid for college that you need. The matter is that you have to make the government notice that you do not possess financial assets on hand for your kid to use as college money. You will be able to end up with cash for college with success if you know how to qualify for financial aid for college.

About the Author:
Follow the link to learn how you can qualify for financial aid for college today and get it done this month. This is the fastest way how you can get financial aid for collage.

Articles Source: Six Essential Tips to Help You Qualify for Financial Aid for College

Got further questions? Catch me on twitter and DM me @529SavingsPlans or e-mail me at 529CollegePlans at Gmail.comWant to be heard? Leave a reader comment below.

How Educational 529 Investment Plans Work

Posted on Aug 14, 2012 with No comments

Aug 14, 2012

This week we’re going to be talking about an important area of college financial planning that for many parents is often very confusing: that is, 529 plans. For many of the parents we work with who have students in their sophomore, junior or senior year in high school understanding what 529 plans are and whether they can be useful is an important question that needs to be answered. So in order to best answer this question we’ll first start talking about the purpose behind 529 plans.

The purpose behind 529

529 plans are a type of savings vehicle designed specifically to help families financially prepare to send their children to college by making consistent contributions to the fund before the student attends college. With total 4 year college expenses for 2010 totally anywhere from $30,000 up to $300,000 and rising 6% per year the United States government has recognized that for many parents raising the necessary cash to pay for college needs to be a long term strategy. With that in mind, the IRS in 1996 created section 529 which allowed a special tax exempt investment vehicle to be created to help make saving for college easier for families across America.

529 plans are similar to other mutual funds or investment accounts in that when you make contributions to the plan the 529 fund manager will invest those funds into a diverse array of stocks, bonds etc that correspond to the investment goals outlined by that manager. 529 plans differ however in that the manager who runs these funds have to adhere to the specific guidelines and regulations inherent to the plan in order to better ensure that the funds are conservatively invested in ways to make sure the money is available for families when the student is ready to attend college.

A 529 Plan is an education savings plan operated by a state or educational institution designed to help families set aside funds for future college costs. It is named after Section 529 of the Internal Revenue Code which created these types of savings plans in 1996.

529 Plans can be used to meet costs of qualified colleges nationwide. In most plans, your choice of school is not affected by the state your 529 savings plan is from. You can be a CA resident, invest in a VT plan and send your student to college in NC.

Enrolling in a 529 plan

There are two ways to invest in a 529 plan.
  1. Directly with the 529 Plan manager. 
  2. Through a financial advisor. 
Here are the top advantages and disadvantages of 529 plans as indicated by the College Planning Saturday staff:

Top Advantages
  • All the account’s earnings are exempt from federal tax when they are withdrawn if they are used for qualified education expenses. This means that, unlike the taxes you have to pay on earnings from regular stock investments, you won’t pay any tax on the 529 account earnings unless you end up using the money for something other than higher education. Earnings are currently tax-deferred in most states as well.
  • A break on the earnings tax isn’t the only tax advantage, either. Although your contributions aren’t pre-tax (you pay state and federal tax on the money you put into the account), there are some states that let you deduct a portion of your contributions from your state taxes.
  • Unlike custodial accounts or Education Savings Accounts (ESAs, IRAs) the beneficiary does not gain control of the money at a specific age (usually 18 or 21 for those types of accounts). The account owner always has control of the money. This helps lessen that parental anxiety that their children may use the money for purposes outside college expenses.
  • There are no restrictions on who can open a 529 account for whom. You can open an account for your child, a friend’s child, a relative or even yourself.
  • Anyone can contribute to the account

Top Disadvantages
  • This may not be suitable strategy for someone who has child about to go to college in less than 2-4 years. It would be better to invest in a traditional mutual fund as the fund expenses would be much lower than in the 529 Plans.
  • Investing in a 529 plan may reduce a student’s eligibility to participate in need-based financial aid.
  • A withdrawal for non-education purpose may be subject to income tax on the gains only and an additional 10% federal tax penalty on earnings.
  • Of the 45 states that have established plans, 27 of them charge expenses of more than 1% per year and 10 of those states take additional sales loads. These fees are considerably higher than those normally charged in a regular mutual fund or investment account

How 529 Plans Work in Action

Here is a simplified example of how 529 plans works:

You file the FAFSA aid application when your child is a senior in high school. Let’s say you have a 529 savings account (you are the owner, not your child) with $20,000 in it of which $10,000 represents your original contribution and $10,000 is earnings.

Year 1:

Your eligibility for federal financial aid this year will decrease by no more than 5.64% of the account value, or $1,128 ($20,000 x 5.64%). Assume there is no further appreciation in the account and you withdraw $5,000 in the fall to pay for the first semester college bills.

Year 2:

You have $15,000 left in the account when you apply for aid for sophomore year, and you will again be assessed up to 5.64% of the account value or $846 ($15,000 x 5.64%). The $5,000 withdrawal brought $2,500 of excluded earnings with it, but as indicated above, none of the withdrawal is counted as financial aid income.

The federal aid formula is more complicated than what is described here, but this gives you a general idea of how to calculate the financial impact of a 529 savings account.

Sound complicated? It is. And we are only talking about the federal financial aid rules her-each school usually sets its own rules when handing out its own need-based scholarships, and many schools are starting to adjust awards when they discover 529 accounts in the family. Also consider that the federal financial aid rules are subject to frequent change. Finally, remember that most financial aid comes in the form of loans, not grants, and so you end up paying it back anyway if you don’t understand how the school incorporates 529 plans into their financial aid award decisions.

The Bottom Line

The bottom line about 529 plans is that fundamentally they operate as a savings account. This means that if you choose to use one you need to make sure you start early so that the accumulated earnings will have the opportunity to grow enough to benefit the family. It’s also important to understand comprehensively how 529 plans are handled by the college’s financial aid office so that your hard work and savings aren’t penalized by the institution reducing your family’s financial aid award because you have one. Last, like all savings accounts with assets invested in the market it’s incredibly important to understand what type of account you have so that you properly understand the level of risks and rewards within the plan so you have a good forecast of what your projected out-of-pocket costs will be when the tuition bill arrives.

For many families, finding the extra income necessary to consistency make contributions to a 529 plan is challenging in light of the many new and constantly changing bills and expenses faced on a daily basis and as a result understanding what strategies and techniques are available to immediately increase financial aid awards and minimize out-of-pocket costs should be of vital concern. If you’re looking for tools and strategies available to immediately increase the quality of your student’s financial aid package then I invite you to attend one of our free workshops hosted by me for advice and consultation by clicking on the following link to discover our next available free workshop.

To discover the business-side behind the admissions and financial aid process the “stuff-behind-the-stuff” sign up to receive (1) a free chapter of Phillip Lew’s College Planning book, (2) a report on which colleges give grants for high income families and (3) a database on where to find the highest quality private scholarships. To instantly receive these free gifts go too and watch our 5 minute introductory free video.

About the Author: PHILLIP LEW

*America's Leading Authority in College Planning

Articles Source: How Educational 529 Investment Plans Work

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The Student Loan Debt Bubble - Infographic

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Student debt is now at 1 trillion dollars. Compare that to credit card debt which is only at $801 billion according to the Federal Reserves G.19 report for February, 2012. The default rate for credit cards is 11.37% while the default rate for student loans is 14.4%.

88.8% of student loan debt is less than $50,000. While almost half of debt that is carried is under $10,000.

Is this really a bubble about to burst?

Because of the housing crisis bubble we tend to see bubbles in everything around us. We are quite aware and sensitive to the specifics of our economy like never before. Admittedly, such high levels of debt in this weak economy could push the student loan problem over the cliff. But at the moment, student debt is being paid back in a reasonable fashion.

This potential bubble is still just talk, today. But debt even in the best economy is risky. It's possible to acquire large amounts of debt and not be able to make your payments because of job loss, sickness, or other unforeseen incidents. It is much better to save for education costs ahead of time with a 529 plan. Going to a inexpensive school or working your way through school makes more sense. We take debt to lightly, it's to easy to acquire and your only a few steps from defaulting on it.

The following infographic courtesy of explains the facts and figures and where we could be head for in the future.

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Is There a Tax Deduction for College Costs?

Posted on Aug 13, 2012 with No comments

Aug 13, 2012

The costs of a college education these days is staggering. Thank goodness the IRS has available some good tax breaks to help keep the costs of college down.

In your 2011 tax year you were able to deduct up to $4,000 of college tuition and fees paid for you, your spouse or any other person claimed as a dependent on your tax return. Even better you were not required to have an itemized tax return to take advantage of this. But the $4,000 figure is not per person but is a family total.

Here's how it works:

You don't get the full deduction if you are unmarried with modified adjusted gross income above $65,000, or a joint filer with modified AGI above $130,000. However, if your modified AGI is between $65,001 and $80,000 for singles or between $130,001 and $160,000 for joint filers, you are entitled to a reduced deduction of up to $2,000.

You're completely ineligible if you're married and file separately from your spouse.

No deduction is allowed on the tax return of any person who can be claimed as a dependent on another's return. So your dependent college-age child can't claim the deduction when your own AGI is too high to qualify. You can't claim the deduction in the same year you claim the American Opportunity or Lifetime Learning tax credit for the same student. Note: this break expired at the end of 2011 but will probably be renewed for 2012 under the same rules explained above.

American Opportunity and Lifetime Learning Tax Credits

In 2012, the American Opportunity credit covers 100% of the first $2,000 of a college student's annual tuition and fees (no room and board costs) plus 25% of the next $2,000. So the maximum American Opportunity credit is $2,000 per qualifying student. Here's the downside, the American Opportunity credit can be claimed for only four tax years for any one student. It's unavailable after the student has logged four years' worth of academic hours. Also, the American Opportunity credit is allowed only when the student carries at least half of a full-time load for at least one academic period beginning in the year the credit is claimed.

The Lifetime Learning credit is less troublesome. It's mainly intended to help defray college costs after the first four years, when the American Opportunity credit is no longer allowed. The Lifetime credit is available for an unlimited number of years and without any requirement to carry a certain course load. Graduate courses are included in this credit. So are random classes not intended to lead to any sort of degree, such as professional training seminars and courses to update your software skills. The credit equals 20% of tuition and fees up to $10,000, for a maximum annual credit of $2,000.

Qualifying expenses for both the American Opportunity and Lifetime credits include post-secondary tuition and mandatory enrollment fees for you, your spouse, and any other person claimed as a dependent on your tax return.

The American Opportunity credit is phased out between AGI of $160,000 and $180,000 for joint filers; $80,000 to $90,000 for unmarried taxpayers. Those who use married filing separate status are completely ineligible. For 2011, the Lifetime credit is phased out between AGI of $104,000 and $124,000 for joint filers; $52,000 to $62,000 for unmarried taxpayers. You're completely ineligible if you're married and file separately from your spouse.

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Pay for College without Sacrificing Your Retirement - Book Review

Posted on Aug 10, 2012 with No comments

Aug 10, 2012

Retirement and your children's college costs are the two most expensive things you will ever have to pay besides your mortgage. They have in common the large amount of cash needed to save and also the needed time frame to accomplish the goal. Most people do not have a clue where to start or what tools are available.

The book and the authors teachings lay out a plan that first shows you what needs to be done and then how to do it.

Every year the cost of college goes up, and every year families struggle harder to meet these rising costs. "Pay for College without Sacrificing Your Retirement" offers help for taking on the double challenge of paying for your children's college education and saving for your retirement. It shows how to maximize your resources, evaluate colleges and financial aid opportunities, avoid crushing student debt, make the tax system work for you, and save for retirement. The book offers essential information for families at all income levels.

 The author, Tim Higgins, is a Certified Financial Planner(tm), Certified College Planning Specialist, graduate of Wesleyan University, and manages his own financial planning practice in Southborough, MA. He has appeared on The Lou Dobbs show, MSNMoney, CNNMoney, and in Money Magazine and SmartMoney magazine. His website is

This book showed me that I was not saving for retirement in a meaningful way. While I was saving enough for college, I was actually sacrificing my own retirement future. The author lays out a plan to do both.

Overall Rating (based on customer reviews): 4.7 out of 5 stars 4.7 out of 5 stars product image
The specs of 'Pay for College Without Sacrificing Your Retirement: A Guide to Your Financial Future' are:
  • Publisher: Bay Tree Publishing (2008-04-01)
  • Language: English
  • ISBN-10: 0972002189
  • Product Dimensions: 8.9x5.9x0.7 inches
  • Shipping Weight: 0.9 pounds

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"A must-read for anyone who is planning to contribute to their child's college costs, regardless of income level."
It changed my approach to paying for college. WPrepaid College Planse have been faithfully putting money into our children's college funds and funding our retirement, but this book really opened my eyes to the big picture by asking two important questions,"How close...Read more
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"I read this book both as a CPA who has many clients ask me about financial aid and as a father of 2 children. In both regards, this book was excellent. The author starts with a wise premise, that your retirement and putting your kids through college are...Read more
"Financial Aid Officer perspective on Tim Higgin's paying for college..."
"It has been reported that student loan dept has now surpassed credit card debt. After spending ten years as a Financial Aid Officer, this is no surprise to me. In my opinion this country is going to have round two of the sub-prime mortgage crisis with the...Read more

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This book brings together in one resource two topics that are inextricably linked; paying for retirement and college. It helped answer many of the remaining questions I had after reading other books on college OR retirement. My personal recommendation if you have a child (or children) is to read this book and implement his strategies. By far the best money I have spent on a book for navigating the shoals of retirement AND college.

Why Not Use An ESA Instead Of A 529 Plan

Posted on Aug 9, 2012 with No comments

Aug 9, 2012

The two best ways to save for college in a tax efficient way is the Coverdell Education Savings Account (ESA) and the 529 College Savings Plan. You are may be wondering, does one plan have a better result than the other. The two plans have many differences and their use depends on your individual families situation.

Coverdell ESAs and 529 plans are different by who may invest in them. As of 2010, the Internal Revenue Service (IRS) restricts investments to a Coverdell ESA to individuals whose modified adjusted gross income is less than $110,000 for single filers or $220,000 for joint filers. The ESA beneficiary must be under the age of 18. With a 529 plan, there are no restrictions on income. Account owners of 529 plans may name anyone a beneficiary, including themselves, regardless of age.

There is a significant difference in the maximum amount you may contribute to an ESA versus a 529 plan. As of 2010, the IRS limits your annual ESA contribution to $2,000 per student until he reaches age 18. With a 529 plan, each state establishes its own lifetime contribution limits. According to Financial Aid Finder, maximum contribution limits for state 529 plans ranged from $100,000 to $365,000 in 2010. You are not required to be a resident of a particular state to contribute to that state's plan.

A qualified withdrawal is slightly different for ESAs and 529 plans. According to IRS Publication 970, funds in a Coverdell ESA may be used to pay for education expenses at an eligible elementary, secondary or post-secondary school. ESA funds may be used to pay for tuition, books, fees, room and board, tutoring, uniforms, transportation, computer equipment and special-needs services. Funds from 529 plans may only be used to pay for tuition, fees, books, and room and board at any post-secondary institution that is eligible to participate in federal student aid programs.

Education Savings Accounts and 529 plans differ in the investment options they offer. According to Financial Aid Finder, ESAs offer a wider range of investment options, including stocks, bonds and CDs as well as mutual funds. With a 529 plan, your investment choices are typically limited to a small number of mutual funds, which usually include age-based and target asset allocation options.

One of the primary things to consider when choosing between an ESA and a 529 is their potential tax implications. The IRS imposes a 10% tax penalty on distributions from either type of account that fails to meet the guidelines for a qualified withdrawal. In addition, the IRS requires you to withdraw all funds held in an ESA prior to the beneficiary reaching age 30 in order to avoid incurring an additional tax penalty.
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Start Your 529 Plan Today to Reach Your College Savings Goals

Posted on Aug 8, 2012 with No comments

Aug 8, 2012

Starting your 529 college savings plan early is crucial to having the necessary money to fund college tuition. Just waiting a few years to begin can really destry all the potential a long time frame can give you.

The sooner you start, the sooner you can take advantage of the compounding effect of time on your investment. Contributing the same dollar amount to your account regularly can be an effective investment strategy and may also help you lower the average cost of your investment. Of course, no method of investing can prevent market risk. Investment return and principal value will fluctuate so that when withdrawn, your investment may be worth more or less than the original amount invested.

In the chart below we have an example of 12 contributions per year with an annual rate of return of 6%. To reach a savings goal of $100,000 requires contributions of $256 a month if you start when your child is a newborn. Waiting 8 years to start saving means you will need to contribute $607 a month to reach the same savings goal.

As you can see starting 8 years after the child is born, you would of missed many years of savings and growth resulting in an account with $17,544 less than it could of been. Time is on your side when saving for a future goal.

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California 529 College Savings Plan

Posted on Aug 7, 2012 with No comments

Aug 7, 2012

California offers a plan called the ScholarShare College Savings 529 plan. If you live in California, you need to consider investing through this 529 plan and incorporate it into your overall investment portfolio. If you save with the California 529 plan and use the money for college related expenses, all of the money will be free of both federal and California tax.

California’s 529 plan lets you start investing at $25. There are no income limitations, so it doesn’t matter how much you bring in each month. If you are an aggressive saver, there is a maximum cap of $350,000 that you can contribute to a California 529 plan.

Due to the portfolio selection range, the fees vary from 0.18%-0.62%.
The established TIAA-CREF Tuition Financing is the administrators of the 529 plan.

ScholarShare Investment Portfolios:

You can invest in any one or a combination of ScholarShare’s 19 investment portfolios, which vary in their investment strategy and degree of risk. ScholarShare offers three broad categories of investment options:

  • Active Investment Options: The fund manager selects the securities to buy for the fund. 
  • Age-Based Option, actively managed: Seven single-focus actively managed portfolios. 
  • Passive Investment Options : Securities are selected to mirror a specific market index. 
  • Age-Based Option, passively managed: Nine single-focus passively managed portfolios. 
  • Principal Plus Interest Portfolio: Assets allocated to a Funding Agreement issued by TIAA-CREF Life Insurance Company (TIAA-CREF Life) 


Total asset-based expense ratio: 0.18% - 0.62%. None for the Principal Plus Interest Portfolio.

State tax recapture provisions:

There is no state tax deduction and therefore no recapture. However, a non-qualified withdrawal by a California taxpayer is subject to an additional 2.5% California penalty tax on the earnings portion, but only if subject to the the additional 10% federal additional penalty tax.

Telephone: 1-800-544-5248     Website:

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