Today's Officer - Winter 2007 - (Page 23) C O L L E G E S AV I N G S If used for qualified higher education expenses (including technical, trade, and graduate school), withdrawals from Section 529 plans are free from state and federal income taxes. They also are very flexible, as funds can be moved from one qualifying beneficiary to another once per year and/or switched from one state 529 plan to another once per year without penalty. For example, assume you have three children and are funding 529 plans for each. If one child gets a scholarship, you could move the assets in that child’s plan to one of the other children. You could even start a 529 plan prior to having children. Open an account with yourself as the beneficiary, start saving, and once a child is born, make the child the new beneficiary and get a big jump-start on college costs. UND E R STAN D T H E FI N AN CI AL A I D GAME As anyone who has ever filled out the Free Application for Federal Student Aid (FAFSA) can tell you, the financial aid process can be time-consuming and confusing. However, it is important to understand how student aid works, to apply early, and to follow through to maximize your chances of putting together the best financial aid package possible. Many mid- to high-income families fail to apply for aid, because they think they make too much money and won’t get anything. This is a huge mistake. While need-based aid programs such as Pell Grants and Perkins Loans might not be available to higher-income families, it still is important to complete and submit the FAFSA to qualify for other key financial aid programs such as Stafford Loans, PLUS Loans, and work-study programs. In addition, many merit-based programs also require completion of the FAFSA. If your child is applying to private schools, then you also will need to complete the College Scholarship Service (CSS) Profile. The best place to start your education on the ins and outs of college aid is www.finaid.com. This Web site offers an excellent compilation of free college aid resources and explains all of the concepts in layman’s terms. Be wary of paid consultants or services that promise to get your child into a certain school or access to scholarship money. Many of these services are shady at best and outright frauds at worst. Data on scholarships and other programs is free for the asking, but it does require some homework. One important item to remember is that most college financial aid and scholarship programs are “first come, first served,” so do your research early and pay close attention to any application deadlines (typically between March 1 and July 1 each year). DEVELOP YOUR FUNDING ACTION PL A N The best way to meet the challenge of college funding is to break the process into manageable pieces. Consider the following agebased guide: ■ Newborn to age 5: Decide on your college funding commitment and start a college savings plan such as a 529 plan. Don’t worry if you have to start small; even $50 to $100 a month can go a long way. Strive to increase your contribution by $25 to $50 a month each year until you reach your target. ■ Age 5 to age 14: Continue increasing monthly and annual savings if possible. Talk to relatives about contributing cash to the 529 plan for holiday or birthday presents instead of giving another toy. ■ Freshman and sophomore year of high school: It’s time to get serious about your college aid education using the resources above. Consider running a practice FAFSA to gauge your financial aid situation. Also, start looking at potential scholarship resources. ■ Junior year of high school: Start the college search in earnest. Be sure to use the school guidance office as a resource. Financial decisions you make this year will affect the college aid picture for the first year of college. Apply for early college entry, if applicable. ■ Senior year of high school: Complete the FAFSA (and CSS Profile, if necessary), and apply for scholarships as soon as possible, because many programs close quickly. Finalize college choices and initial funding plans. Remember, financial decisions you make this year will affect the college aid picture for the second year of college. By committing early, making payments well in advance, and taking advantage of the tools available to help you to become educated about college funding, any parent can develop an easy, no-worry college-funding plan. ★ HEL P F UL SITES TO GE T YO U STA RT E D ■ www.moaa.org/529 — MOAA has partnered with low-cost leader Vanguard to bring you the “Degrees of Success” 529 College Savings Plan for military families. The $3,000 initial investment is waived if you join through MOAA and sign up for a $50 regular investment plan. ■ www.finaid.org — best compilation of college aid information on the Web ■ www.fafsa.ed.gov — online home for the FAFSA ■ www.collegeboard.com — This site provides great information for parents and students alike. ■ https://flagship.vanguard.com/VGApp/hnw/planning education/college — Access one of the best college cost calculators on the Web by selecting “How Much Do I Need to Save” under College Savings Tools. ■ www.moaa.org/scholarshipfinder — Find scholarships, grants, and loans available to military families. Winter 2007/08 TODAY’S OFFICER 23 http://www.finaid.com http://www.moaa.org/529 http://www.collegeboard.com https://flagship.vanguard.com/VGApp/hnw/planningeducation/college https://flagship.vanguard.com/VGApp/hnw/planningeducation/college http://www.finaid.org http://www.moaa.org/scholarshipfinder http://www.fafsa.ed.gov
For optimal viewing of this digital publication, please enable JavaScript and then refresh the page. If you would like to try to load the digital publication without using Flash Player detection, please click here.