Personal Finance and Investing

Obtaining a college education is becoming more important than ever.  The work environment is becoming more competitive, and without a college degree, your choices are somewhat limited.  It is for this reason, amongst others, that more teenagers and adults are making the decision to attend college.

So the big question, “How can I pay for college?” There are a few different ways you can pay for college.

Savings: There are a few college savings programs available today that offer tax advantages.  The most common, and my most recommended is the 529 plan.  A College savings 529 plan allows you to save for your, or your child’s education in a tax-deferred account. As you earn interest over time, you do not have to pay taxes on any of the interest accrued.  And, the best part, when you withdraw the funds from the account, to cover the cost of higher education expense at an accredited college, you do not pay any taxes.  This plan can be a great benefit if you are planning ahead and have time to let your contributions grow.

In addition, 529 plans have flexibility.  The owner of the account has the ability to change the beneficiary should the designated beneficiary not need the funds for college.  In this case, the beneficiary can be changed to almost any immediate family member.

Grants: If you were walking down the street and someone handed your $1500 and told you they wanted to pay for your college education and, you wouldn’t ever have to pay it back, would you take it?  I know I would.  A grant works very similarly.  A grant is money, handed over by the government to assist you with your cost of schooling.  Best part is,  it never has to be paid back!!  There are of course income limitations that you must meet before to become eligible, but no matter how ineligible you think you are, apply.  The worst result is you could get is you will get denied.

So how do you apply for a grant?  When applying for student loans you will have to visit www.FASFA.org FASFA stands for Free Application for Federal Student Aid, and is exactly that.  It is a free application that once submitted will allow you to be evaluated for Federal and state grants, subsidized student loans, and unsubsidized student loans. Since it is free to complete, you have nothing to loose!

Student Loans: There are two types of loans available.  The first, a subsidized loan, will not accumulate any interest charges while you are in school.  So, if you borrow $10,000, when you graduate you will owe $10,000. (There is sometimes a small fee associated with initiating the loan)  Once you are out of school for a period of time, (this varies depending on the contract) you will begin to have interest charges.  An unsubsidized loan is a loan that does accrue interest while you are in school, but no payments are required until you have graduated.  So, if you borrow the same $10,000 – $2500 per year- an the interest rate on your loan is 4%, you will owe approximately $11,000 when you graduate.  You can apply for student loans by filling out the form at www.FASFA.org

If you need assistance setting up a 529 plan, or have questions about Grants or Student Loans, please give GMF a call.

An investor should consider the risks, objectives, charges, and expenses associated with the 529 plan before investing.  This information and more is available in the issuer’s official statement, which can be obtained by contacting the plan sponsor or by contacting your financial advisor.  Read it carefully before investing.

An investor should also consider before investing whether the investor’s or designated beneficiary’s home state offers any state tax or other benefits that are only available for investments in such state’s qualified tuition program.

Jackie Weitzberg, CFP® |Certified Financial Planner | www.GuideMyFinances.com | Jackie@guidemyfinances.com | Phone: 877.884.0550 | 9740 Appaloosa Rd #200 San Diego, CA 92131 |

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