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As a new or expectant parent, you have a million things on your mind and preparing for something 18 years into the future is unlikely to be at the top of the list. However, college is expensive and getting more so every year. One of the most important actions you can take for yourself at this stage is to begin to save for your child’s education, giving yourself a longer period of time to save and grow the money.

First, it’s important to choose the investment vehicle that meets your needs. There are several fund types to choose from, all with their own rules and tax consequences. You can even have more than one account, depending on how your finances change over time. Below are some college saving products to consider:

• 529 plans: This plan's name comes from an IRS code section specifically allowing any adult(s) to save for college in the name of a child. The plan has tax benefits; the investment earnings from the account grow free of federal taxes if used for qualifying college expenses. States sponsor 529 plans that may also have tax advantages to state residents. Any unused funds can be designated for another student at a later time.
• Coverdell Education Savings Accounts: The Coverdell educational savings account is a tax-advantaged way to contribute up to $2,000 a year to a child’s account. This account isn't available to everyone because you need to be under a certain income level to contribute. The advantage is that funds grow free of federal taxes. Sometimes there are state tax advantages.
• UGMA accounts: The Uniform Gift to Minors Act is a custodial account, which means your child or the minor for whom you create the account can own investments like stocks and/or mutual funds. This account gives them the assets but allows the custodian to control them until the minor reaches legal age. This isn't considered a traditional college fund because the money doesn’t grow tax free. Also, it counts against the student and parent when applying for college financial aid, thus reducing the amount of financial aid that the school may offer your child.
• ROTH IRA : Most people associate a ROTH IRA with retirement savings. However, you can use a ROTH IRA for college as long as the withdrawals are for qualified educational expenses such as tuition or room & board. You can avoid the 10% early withdrawal penalty and your contributions can be withdrawn tax free but the earnings will still be taxed. If are you over 59 ½ and the ROTH has been open for at least 5 years any amount withdrawn is tax and penalty free.

·  Savings Bonds:  Money redeemed from Savings Bonds and used to pay for higher education can be excluded as income for tax purposes, some restrictions do apply. Although this money is guaranteed by the government and extremely low to no risk the current interest rates are also extremely low. Right now, individual Series EE savings bonds are earning an annual fixed rate of 0.10%.

·  Permanent Life Insurance: Using a cash value life insurance policy isn’t typically top of mind when it comes to saving for college, but it can be used as part of a well-rounded funding plan. The value of a policy can grow over time and ultimately provides access to money with several advantages as a college savings fund.

As with any financial planning topic, there is no one-size-fits-all approach when it comes to saving for college. Each option comes with benefits and drawbacks especially if you are hoping to  qualify for Financial Aid. We encourage you to contact us to discuss your unique situation and to develop an individualized plan for meeting this financial goal.

For many families, the path to college is exciting and often stressful. We offer a comprehensive, "know BEFORE they go" program that addresses your unique circumstances, including: 

- School selection guidance 

- Maximization of financial aid and other resources 

- Minimization of student loan debt

- Gain confidence & clarity about how today's choices impact the future

1. Gather Data:  Akamai College Consultants guides parents and their students through the college selection and financial aid process. We work with your family to help make college affordable while still keeping other financial priorities in balance. Our goal is to maximize the benefits your family is eligible for and minimize the amount of debt both students and parents incur. 

2. Student Aid Index:  Based on the financial information gathered, we can accurately calculate your SAI, the number that determines a student's eligibility for financial aid. In many cases, we can recommend strategies to reduce your SAI and increase your financial aid package. 

3. Calculate Aid:  Once the SAI is calculated, we will determine the potential for need based aid and/or any merit (achievement) aid your student may qualify for. A high income or net worth doesn't mean your family can't qualify for free money!

4. "Right Fit" Colleges:  We involve your student in the planning process. By evaluating academic and social interests and combing those details with your financial data we will uncover the "Right Fit" colleges. Often private schools are a better value than many in-state public colleges. 

5. True Cost Analysis:  College is one of the largest financial investments and students will make. After we help you determine the "Right Fit" colleges, we provide a year-by-year analysis that will map out how to pay for college using the resources available (cash flow, savings, loans and scholarships/grants). We even go a step further by determining the expected amount of debt owed at graduation as well as a projected monthly loan payment for each college option. 

6. Ongoing Guidance:  Your student has applied and been accepted, so the hard part is over, right? Actually, the journey is just beginning. Ongoing check-ins with your family will ensure your student remains on track and that financial deadlines are met. Our service also includes annual updates to the FAFSA and other required documents. 

7. Graduate!

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