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How do you start a college fund and are there other financing options if you want to study even further?

College is expensive. And it keeps getting even more expensive as the years progress. Starting a college fund early enough seems to be the best option but where or how do you even start? What happens if your parents already catered for your undergrad and you wish to apply for financial aid for graduate students? Are the processes and opportunities the same? Are there grants for PhD students or does the buck stop on undergraduates? Does funding for schools affect funding for individuals in the school?

Kristi Hammond

in Student Loans

1 answer

1 answer

Bethany Evans on February 22, 2018

Starting a fund for college for your kids is so important. The sooner you start the better and it will relieve you from the strain of trying to make that cash appear or applying for all sorts of scholarships just so your son and daughter can go to college. Then repeat the same for you other kids. It’s too much of a hustle. I’ll highlight 4 directions in which you can look:

  • Coverdell Education Savings Accounts

The Coverdell Education Savings Accounts were formerly known as Education IRAs. It allows you to make contributions for each child until he or she gets to the age of 18.

  • Section 529 plans

Section 529 is generally a great idea. It’s a tax-advantaged investment plan that’s issued and operated either by an educational institution or by the state. It’s named after the tax code which governs them.

  • UGMA- Uniform Gifts to Minors Act and UTMA- Uniform Transfers to Minors Act

UGMA and UTMA allow for the parent to set up an account in the child(ren)’s name. Transfers to a UGME/ UTMA ACCOUNT happen on a per child, per year basis. The IRS website is a great place to check for the current contribution limits.  

  • Investments

It’s advisable to invest cash into an account that’s specifically set aside for your children’s education costs. It is safer to make the high risk investments when your child is young - below 5 years old.

Graduate students applying for financial aid may feel like it’s easier for the undergrad to get funding because there seem to be more options targeting the first degree. The process is similar only the exact type of aid offered is dependent on the school. It varies with different schools and programs.

Doctoral students and applicants have so many opportunities when looking for financial support. This could either be private and public sources. Many students are trying to get grants at the same time so PhD student grants can be competitive in some cases.

School funding however doesn’t affect your likelihood of getting a scholarship or grant. It is a personal decision and grant receivers are chosen individually on a personal and educational basis. It all begins with filling out the FAFSA form every year before starting a new school term. Doctoral students should have this as the number one entry point. Other than applying through FAFSA, different schools and universities often have their own grants and scholarships.

Wilson Hansen2 years ago

There is one strategy that has been left out which will also help get that college fund: tax credits. When you compare tax credits to tax deductions, the credits come out on top. There are two types of programs: The Hope Credit and the Lifetime Learning Credit. Hope Credit helps with the first two years of tuition. It’s an option that is available to people who pay their taxes and their dependents. The maximum creditable amount is $2500 per academic year, per student. The Lifetime Learning Credit is also for post-secondary students. $2000 is the maximum credit and it’s per tax return. Your income should go beyond a certain amount for you to qualify in both programs. The two credits cannot be claimed if you pay expenses in the same tax year using IRA. We also cannot forget financial aid. A lot of money has been set aside for education in the form of work-study programs, scholarship and grants. It doesn’t hurt to give it a shot.

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