Smart Strategies for Funding Your Child’s College Education

By Craig Valentine, CFP^®, ChFC^®, CRPC^®, CLU^®, CLTC^®, RICP^®, CAP^®

Financial Advisor, RJFS

With your first-year student now on campus and the sticker shock of their college experience still fresh, you might be wondering what planning options are available to better prepare for your next scholar’s tuition bill.

While financial aid, including need-based support, work-study, grants, scholarships, and loans, can provide short-term relief, a more effective approach is to develop a goal-based educational plan. This plan should be designed around specific investment objectives and an appropriate time horizon.

Here are some common solutions for this objective:

Tax-advantaged 529 College Savings Plan (529 Plan)
Individual or Joint Investment Account with your children as a transfer-on-death (TOD) beneficiary
Uniform Gifts to Minors Act (UGMA)/Uniform Transfers to Minors Act (UTMA) Custodian Accounts
Coverdell Education Savings Account (ESA)
Custodial ROTH IRA
Child Life Insurance

Remember, you must complete the United States Department of Education Free Application for Federal Student Aid (FAFSA) to be considered for federal student aid. The solutions mentioned above are weighted differently when schools use the information from your FAFSA and federal tax returns to calculate your Student Aid Index (SAI). Your SAI is a formula-based index number that helps colleges and universities determine how much financial support you may need.

If you would like to review these solutions to better understand the pros and cons of each, please do not hesitate to contact us. Educational planning can sometimes conflict with retirement planning, so we encourage a holistic review and conversation based on your comprehensive financial plan.

Any opinions are those of the authors and not necessarily those of Raymond James. Investing involves risk and you may incur a profit or loss regardless of strategy selected. Ð'dInvestors should consider, before investing, whether the investor’s or the designated beneficiary’s home state offers any tax or other benefits that are only available for investment in such state’s 529 savings plan. Such benefits include financial aid, scholarship funds, and protection from creditors.Ús with other investments, there are generally fees and expenses associated with participation in a 529 plan. There is also a risk that these plans may lose money or not perform well enough to cover education costs as anticipated. Most states offer their own 529 programs, which may provide advantages and benefits exclusively for their residents. The tax implications can vary significantly from state to state.