Saving for College FAQ's
How should I save for college?
The best college savings strategy depends on your goals, timeline, and financial situation. Many families choose to save through dedicated education accounts, such as 529 plans, because they are specifically designed for qualified education expenses. Regular contributions over time can help families build a fund for future educational costs while staying focused on their broader financial goals. Starting early may provide more time for savings to grow, but it's never too late to begin planning.
Which is better, 529s vs. UTMA?
Both 529 plans and UTMA (Uniform Transfers to Minors Act) accounts can be valuable tools for college savings, but they serve different purposes. A 529 plan is specifically designed for education funding and offers tax advantages for qualified education expenses. An UTMA account provides greater flexibility in how funds may eventually be used, but the assets become the child's property when they reach the age of majority. The appropriate option depends on your family's objectives, desired level of control, and intended use of the funds.
What are the main ways to pay for college?
Families typically use a combination of resources to fund higher education. Common sources include personal savings, 529 plans, scholarships, grants, work-study programs, student loans, and current income. In some cases, grandparents or other family members may also contribute toward education expenses. Developing a comprehensive funding strategy can help families evaluate available options and determine an approach that aligns with their long-term financial goals.
How is income calculated for FAFSA?
The Free Application for Federal Student Aid (FAFSA®) uses financial information from tax returns and other reported assets to help determine eligibility for federal student aid programs. Factors including parent income, student income, certain assets, household size, and the number of family members attending college may be considered. Because FAFSA rules and calculations can change over time, it's important to review the latest requirements when preparing to apply for financial aid.
How do grandparents contribute to college savings?
Grandparents can play a meaningful role in helping future generations pursue educational opportunities. Depending on their goals, they may contribute directly to a 529 plan, establish a new account, make gifts designated for education expenses, or incorporate education funding into a broader legacy planning strategy. Coordinating these efforts with a family's overall college savings plan can help ensure contributions are used effectively while supporting long-term family objectives.
Prior to investing in a 529 Plan investors should consider whether the investor's or designated beneficiary's home state offers any state tax or other state benefits such as financial aid, scholarship funds, and protection from creditors that are only available for investments in such state's qualified tuition program. Withdrawals used for qualified expenses are federally tax free. Tax treatment at the state level may vary. Please consult with your tax advisor before investing.
