Personal Finance and Investing

Paying for a college education may be the greatest gift you can give. However, it may also be the most costly. It is no secret that college expenses have been rising at an alarming rate. According to The College Board’s report, “Trends in College Pricing” tuition has increased at twice the rate of inflation over the past 20 years (2001). This means in another 18 years parents can anticipate paying approximately $115,000 for total expenses at a 4-year public college or about $250,000 at a private institution.

Here’s what you can do now to help with the rising costs of a higher education in the future—it’s called the 529 College Savings Plan. Named for a section of the Internal Revenue Code that permits very favorable tax treatment, this state sponsored college savings plan can be withdrawn completely tax-free if the money is spent on qualified educational costs.

Account owners can generally write-off up to $55,000 ($110,000 for married couples) per beneficiary once per five-year period without incurring a federal gift tax. For example, an affluent couple can potentially send their 4 grandchildren to college and immediately eliminate $440,000 (4 x $110,000) from their taxable estate.

Besides the tax incentives, there are some additional features that make 529s a logical choice for college funding. There are no age or income limitations and the contribution limits are high, some reaching $268,000. Account owners keep control of the assets. If, for any reason, the owner must close the account, a penalty of 10% will be assessed on the earnings and the balance may be used at the owner’s discretion. In addition, 529s offer the ability to change the plan’s beneficiary. So if little Johnny decides to skip college the account can be reassigned to his little sister. If she wins a scholarship, the money can even be withdrawn without a penalty.

Each state’s 529 plan has its own features and benefits. All state plans are not created equal; some state plans are better than others. (Be cautious, some state plans do not offer diversified portfolio options.) Fortunately, most state plans allow you to invest across state lines, meaning that if you don’t like the plan your state has to offer, you can look to other states and go with a plan that you’re comfortable with. Currently very few states offer tax breaks on their 529 plans, so investment selection and management experience should carry more weight when choosing a plan.

With a college savings plan, you may select investment options based upon your goals and time horizon. One of the more common investment choices is based on the current age of the beneficiary. Investment allocations will change over time, so that the older the child gets and the closer he/she gets to college age, the more conservative the underlying investments become.

Figuring out the various tradeoffs among the different plans can be quite confusing. No particular type of account or investment option is appropriate for every investor. Make sure you consult with a well-informed investment advisor prior to investing.

Robert Valentine is a well-known expert in the matters concerning investors. His popular 529
articles have been published by several publications throughout the United States. Please visit his website, http://www.themoneyalert.com to view his column.

If you are in college, about to go to college, or have children that will soon be in college, student loans should be on your mind.  Can you go to college without borrowing money, is it even possible? 

It is estimated that two-thirds of students borrow money during their four year degree at public institutions – with an estimated average debt of $23,000.  One in ten owes more than 44,000 bucks.  Private school numbers are, of course, higher.

I would argue that trying to avoid student loan debt in these precarious financial times would be well worth the sacrifice.

How can it be done?  Here are three secrets to nearly painless college savings:

Use tax advantaged savings plans such as 529-B’s and its numerous variations – which can vary state by state-and start early to reach your target. If you wait until the kid’s in Junior High to start saving will require higher monthly savings. Let Grandpa do it:  Savings bonds and similar birthday or holiday monetary gifts put into a college fund, makes way more sense than buying a toy or game that will be destroyed and forgotten by the end of the day.

In addition to parents saving for college, I think kids saving for their own college expenses will increase with the current economic challenges.  Working part-time in high school and during college, full time during summers and Christmas, can go a long way towards a student saving for their own annual college costs. 

 It will also decrease the tendency to slack off and party.  If it’s your own money you are blowing, the likelihood of focusing on your studies is much greater.  No, it is not your birthright to attend beer soaked frat parties.

Another common problem is misallocation of funds.  No, I don’t mean somebody stealing your money, but rather, having priorities screwed up.

Why is Junior driving a $25,000 dollar car with the parents paying monthly car payments, with a boat, jet ski or four-wheeler in the yard, but the parents whining “I have no money at the end of the month to save toward college.”

If at the end of the day, however, college rolls around and there are limited funds in the bank, what do you do?

Take all opportunities to identify FREE money.  Scholarships, grants, military commitments, are available-with a little digging.  Check out http://edu.fastweb.com/v/o_registration/flow/step1 Once free money is used up or is not an option, then filling out a FAFSA form  (www.fafsa.ed.gov) at the college financial aid office and discussing your options with them is the next step. Make sure you learn the difference between direct federal loans such as Perkins which have extremely low interest rates and Stafford programs.  With Stafford, find out if you qualify for subsidized loans, which means the feds pay all interest costs while you are in school and during the deferment time frame. School financial aid officers are your best friend – suck up to them, take them chocolates, and mow their yard (just kidding, but I think you get the picture). Make sure you understand the loan limits per year, and have a plan for what to do for the difference. Understand your rights associated with illness and financial hardship during your loan repayment period. Remember, you must be in school at least ½ time to full time to qualify for federal loans.  Don’t drop too many classes. Keep all your paperwork in organized files, because the piper will have to be paid at the end of your education-trying to find what and who you owe may be difficult after moving from dorm to apartment to frat house,  or back to Mom and Dad’s, because you don’t have a job.

Repayment options are beyond the scope of this article, and congress is considering major changes this year in the college loan arena, so keep your eyes and ears open. A great website for student loan information is http://www.finaid.org/loans/ .   

Just keep in mind that government loans can be great because of lower interest rates and more lenient payment plans.  But the government also has enormous power when it comes to collecting on your student loan debt.  Consider the seizing of your tax refunds, denial of new loans, wage garnishment without going to court, taking part of your social security check and large collection fees as just a few of their tools.  Also there is no statute of limitations, if they find you on Tahiti 15 years from now, tough; your behind is theirs, as they say….

Private loans are still available, but much harder to come by with current credit limitations that are increasing daily.  Your FICO score better be good (>700) and you must be up to date with all your payments.

So in summary, the best loan for college is the one with a balance of ZERO.  If you must borrow, plan wisely.  You don’t want to be paying Sallie Mae your last college loan payment when you are getting ready for that first Social Security check.

Dr. Dean is an established and successful OBGYN, and professional author. He can be reached at Info@TheMillionaireNurse.com or 229.220.0339 http://www.themillionairenurse.com

One among the largest banks in the world, the Citibank credit cards are used by different categories of people all over world for their various needs.

The Citi Upromise Card, a joint effort of the Upromise network and the Citibank, promises to let you save for future college expenses. The Upromise network is a free service network including a number of companies that helps cardholders save for college through their everyday purchases.

The promise is fulfilled by each member of the network, with every retailer offering you back a percent of all your eligible expenses towards college contributions and expenses. This way the returned money (which goes to your Upromise account) will be no less than an investment in some tax-advantaged college savings account or program.

This is not all. Citibank further returns an extra 1% of all your spending to your Citi Upromise Card account. Moreover, on shopping with the merchants who are a part of the Upromise network, the cardholder will get a good 10% of his/her purchase back, which will be added to the Upromise account.

Other Benefits

The Citi Upromise Card charges no annual fee. It has an appealing 0% introductory rate on balance transfers for 12 months. The regular interest rate of 14.24% is low in comparison to the other reward cards available.

Knowing that it is quite difficult to wait for the rewards (which a cardholder gets to enjoy quite late) as in a college savings rewards program, the card makes provision for some immediate rewards such as a 2% savings on gas through Mobile and Exxon.

Being a platinum level credit card, the Citi Upromise Card permits you to receive all the benefits of a platinum credit card. Citi cards are famous for its security options, even facilitating you to have your personal photo on the face of the card. Further, you are also not liable for any unauthorized purchases, which are made with the credit card in the event your card is stolen or lost or in cases of identity theft.

You can avail of the Citi Upromise Cards’ Rewards Programs without having to pay any annual fee. The convenient automatic bill payments allow you to pay all your monthly bills, without buying any postage or writing a check.

Perks

Like most of the other credit cards, the Citi Upromise Card also offers the cardholder a number of Internet account related services, a maximum of $1000000 in travel accident insurance, lost luggage assistance and medical and legal referral services.

The card also offers emergency card and cash replacement, many emergency and travel assistance services, financial statements at the end of the year and many more facilities.

Richard Gilliland Provides Expert opinions and reviews to help you Compare and Apply for a Credit Card – Compare Credit Card Offers with Credit-Wisdom.com – Unraveling the best in Personal and Business Credit Cards.

What is now the best way to save for college expenses?

In my professional opinion, for most people, It’s the 529 College Savings Plans. They are now worth a very serious look!

Section 529 of the Internal Revenue Code (the actual name) was put into place to encourage families to save and plan ahead for escalating higher educations costs. There are currently nearly 9 million 529 Plan accounts now with roughly $90 Billion dollars invested.

Here are a few reasons that most people don’t know that makes 529 Plans more attractive than ever.

The Tax Increase and Protection Act of 2005 (which became law in 2006) extended the “kiddie tax” rules from age 14 to 17, which made traditional savings accounts, also known as custodial accounts, much less appealing. That and other new laws made 529 college savings plans MUCH more appealing.

With these plans, you could open an account and deposit money (NOT deductible on your federal tax return) and the money would grow tax-free. These deposits could be invested in money market, bond and stock mutual funds.

The Pension Protection Act of 2006 guarantees the tax-free withdrawals from the plans for higher education expenses will not fade away as they would prior to the PPA of 2006.

That is a pretty good deal isn’t it? But there are also estate planning and gift planning benefits that aren’t available on any other college funding plan.

The tax code allows parents or grandparents to deposit up to $60,000 in a 529 plan for each child (married couple can deposit twice that amount), free of gift tax, due to the laws allowing up to 5 years of gifting (up to $12,000 per person per year) to be done in one fell swoop with these college saving plans. It is a great way of getting assets out of the wealthy estate for the benefit of heirs.

And it gets even better! And you know what else is great

Since 1997, Mark J. Orr, a Certified Financial Planner, has helped hundreds plan for more financial success through powerful strategies and advice. To get 101 FREE Financial Planning Tips and to Register for his complementary e-newsletter, simply go to: http://www.SmartFinancialTips.com