College Funding Solutions
While there are numerous ways to fund a college
education, here are several of the most popular:
Mutual
Funds
Mutual funds pool the funds of many investors
to pursue common investment goals like aggressive growth,
conservative growth, income, or combined growth and income.
They allow you to invest relatively small amounts (typically
$1,000 for the first investment and as little as $50 for subsequent
investments). Mutual funds offer the benefit of professional
management and diversification among a variety of stocks and/or
bonds. Today there are more than 7,000 mutual funds to choose
from.
If your child is young, aggressive growth funds
might be your best choice. Historically, the stocks of small
companies have outperformed all other asset classes. (Of course,
past performance doesn't guarantee future success.) The more
time you have before you need the money, the better aggressive
growth is likely to work for you.
Mutual funds are offered by prospectus only.
The prospectus provides complete information, including charges
and expenses. Before investing in any mutual fund, read its
prospectus carefully.
For information on how to choose mutual funds
to fund your child's or grandchild's college education, contact
us.
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Zero-Coupon
Treasury Bonds
Zero-coupon bonds work like U.S. Savings Bonds:
you buy them at a deep discount and receive the face value
at maturity. Most zero-coupon Treasury bonds (often called
"zeros") are available with a minimum $1,000 face
value. They are backed by the full faith and credit of the
United States and are exempt from state and local income tax.
At current rates, a $10,000 investment can grow to approximately
$20,000 in twelve years.*
* Based on yield to maturity at current rates
as of 9/26/00. Prices and yields are subject to availability.
Zero-coupon Treasury bonds sold prior to maturity may be worth
more or less than their original cost, and their prices vary
more with interest-rate movements than with other bonds of
similar maturity. Interest income is subject to Federal ordinary-income
tax each year, although the investor does not receive it until
maturity.
For more information on how zero-coupon bonds
can help you fund your child's or grandchild's education,
contact us.
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College
Financial Aid
FinAid,
The Financial Aid Information Page
FinAid offers a wide range of resources. It's
well worth a visit on the strength of one of these alone:
FastWEB (Financial Aid Search Through the WEB), a database
that uses an online questionnaire to match your needs to more
than 180,000 private-sector sources of aid. FinAid is maintained
by Mark Kantrowitz, author of The Prentice-Hall Guide to Scholarships
and Fellowships for Math and Science Students, and is sponsored
by the National Association of Student Financial Aid Administrators.
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CollegeNet
CollegeNet
is designed mainly to help users search databases for appropriate
colleges, but it also offers a financial-aid link to a variety
of resources. Information sources found through the links
include the Department of Education, the Federal Trade Commission
(for avoiding financial-aid scams), and banks offering student
loans.
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Custodial
Accounts (UTMA)
Custodial Accounts, under the Uniform Transfers
to Minors Act (UTMA), provide a way to save for college that
is tax cost effective. You can transfer up to $10,000 a year
to your child or grandchild without incurring gift taxes.
The Custodian guides account while child is a minor until
they reach the age of majority of 18 or 21, depending on your
state's regulations (age 21 in New York State). Funds are
clearly set-aside for the child. There are no costly legal
fees or reporting requirements. Investment income typically
is taxed at child's lower tax rate.
For more information on Custodial Accounts and
how they can help you fund your child's or grandchild's education,
contact us.
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Educational
IRA
*please keep in mind that this information will be changing
in 2002 due to the new tax laws.
You or your child may establish Education IRAs
to help finance the cost of paying for qualified education
expenses such as tuition, room and board, books and supplies.
An Education IRA offers tax-free accumulation and tax/penalty-free
withdrawals for qualified education expenses. Funds are clearly
set aside for the child/student and anyone can contribute
- parents, grandparents, other relatives, friends or the child
him/herself. A maximum of $500 can be contributed per child
in the year 2001, $2000 per beneficiary after 2001.
For more information regarding Education IRAs
and how they can help you fund your child's or grandchild's
education, contact us.
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529
College Savings Plan
*please keep in mind that this information will be changing
in 2002 due to the new tax laws.
Have you heard about the 529 College Savings
Plans? First authorized by Congress in 1996, qualified state
tuition programs, or 529 college savings plans, allow states
to offer investors professionally managed, tax-advantaged
portfolios to help meet rising college expenses. Proceeds
may be used at any accredited post-secondary school in the
Untied States for part or full time education. Contributions
may be state tax deductible; earnings accumulate tax-free;
and qualified distributions may be tax-free after 2001.
For more information on the 529 College Savings
Plan and how it can help you fund your child's or grandchild's
education, contact us.
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