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College Financing Basics  Ch 2: Building a college fund
Create, grow and harvest your very own college money tree – in a handy investment plan!
 
   
Building a college fund

Comparing education savings plans
By Bankrate.com
 

Savings plans
  Coverdell Education Savings Account Prepaid Tuition Plan 529 Savings Plan
Tax Benefit Earnings in the account grow tax-free until withdrawn. Withdrawals are tax-free if they do not exceed the beneficiary's qualified education expenses for the tax year. Earnings in the account grow tax free. Withdrawals are tax free as long as the money is used for higher education. Earnings in the account grow tax free. Withdrawals are tax free as long as the money is used for higher education.
Financial-aid impact These investments are treated as parental assets and reduce your child's eligibility for federal student aid by a maximum 5.64 percent of their value at the time of application. A prepaid tuition plan is considered a resource of the parent if the parent owns the account. This was clarified by a 2004 ruling from the Department of Education. Money in a 529 plan is considered a parent's asset, and financial-aid officers expect parents to contribute 5.6 percent of the money toward college expenses each year.
Can account be rolled over? Yes. Any amount can be withdrawn and rolled over into a Coverdell account for another family member. There are no tax consequences as long as the new beneficiary is under the age of 30. Money in the account may be transferred tax free to the prepaid tuition plan of a family member. Money in the account may be transferred tax free to the 529 plan of a family member.
-- Posted: March 31, 2005
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TABLE OF CONTENTS
  Ch 1: Sizing up the challenge
  Ch 2: Building a college fund
  Ch 3: Last-minute financing
  Ch 4: Where to find the money
  Ch 5: Paying off student loans
  More Basics
College Financing
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