Like so many families, you are worried about paying for college. That is why you have been saving for college for some time. Even though you established your savings accounts and have been contributing regularly, when was the last time you checked on how you were doing? If it’s been awhile, then it’s time to review your college savings.
Check Your Progress
Start by accessing your latest college savings account balance. Then, consider the balance in relation to your college savings goal amount before college. If your kid’s college list has changed, consider using
Quatromoney
to check on the projected college costs and see how far your savings to date will stretch. Then, accessing your latest college savings account balance and consider
Rebalancing Your College Savings
Whatever your college savings vehicle,you should review its performance at least annually. Hopefully, when you check your current balance your earnings are increasing, and you are on target for your college savings goal. If not, it’s time to readjust. Some accounts like
529 college savings plans and
Coverdell Education Savings Account (ESA) allow you to choose your investment portfolio that may be a combination of securities like stocks, bonds, money market instruments, and other assets. This means you may be able to elect for another fund that has better returns.
If you have an account like a regular savings account or money market which locks you into a specific rate of return for the length of the term, then consider whether or not to open another account that gives you more earnings and flexibility.
Consider Whether You Are Using a Tax-Advantaged Account
Some college savings accounts received more favorable tax treatments than others. For instance, the earnings of 529 plans and Coverdall ESAs grow free of federal taxes. In fact, some 529 plans grow state tax-free earnings as well. Plus, state residents who open an account through their own state’s plan may be eligible for tax credits or deductions on their state income taxes and in a few cases may even be eligible for state matching grant for their contributions. As long the amount of the withdrawals is used for the beneficiary’s qualified education or other qualified expenses, both have great tax advantages.
Decide if Your College Savings Vehicle will Maximize Your Need-Based Aid Eligibility
Not all assets are treated equally when a college determines
need-based aid. Colleges assess that more of a dependent students’ assets are available to pay for college costs than parents assets. For instance, typically 20% of every student asset is seen as available to pay for the next academic year of college whereas typically no more than 12% of the net worth of a parents assets are available. Some families that think they will be eligible for need-based aid may prefer to have the custodial version of 529 college savings plan so the funds will be required to be reported in the parents assets, not the students.
Consider Talking with a Professional
If you have been handling the creation, maintenance, and strategy of your college savings, decide if it is time to consider using a financial planner. Sometimes it's easier to consult a professional who lives, eats and breathes financial strategies. Our friends at
The College Funding Coach® have a team of financial advisors helping families better understand the complex strategies for paying for college and making higher education more affordable. Plus, they offer a free consultation to help you decide if you’d like to work with them.
Colleen Krumwiede
Co-Founder & Chief Marketing Officer
Colleen MacDonald Krumwiede is a financial aid and paying for college expert with over a decade of financial aid experience at Stanford GSB, Caltech, and Pomona College and another decade at educational finance and technology companies servicing higher education. She guides go-to-market strategy and product development at Quatromoney to transform the way families afford college.
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