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Saving for College and Educational Cost

As college tuition cost and inflation continue to rise, it is becoming more and more difficult for families to afford the cost of college education. We can help guide you through savings and investment options intended to help you meet the rising cost of tuition.

We offer several products specifically designed to help families save for educational costs. Many of these products offer tax-deferred benefits. Contact us today so we can help you determine which educational savings product is right for you.

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Educational Savings Account

529 Savings Plan

529 plans are flexible, tax-advantaged account savings plans designed specifically for college savings and offer a wide use of funds that can be used at any college in the United States or abroad that is accredited by the Department of Education. These plans are generally sponsored by a state or state agency. Contributions are made post-tax but earnings are tax-free (federal and most states). Additionally, most plans will allow the money to be used towards graduate school programs as well.

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Coverdell Education Account (ESA)

A Coverdell Education Account (ESA) — formerly referred to as an Educational IRA — is a tax-advantaged account used to help families save for a child’s K-12 or college education.

Contributions are made post-tax and are not tax-deductible, however earnings grow tax-free and should remain tax free (federal and most states) upon withdrawal. Contribution limits are set at $2,000 a year and cannot be made after the beneficiary reaches 18 years of age.

Withdrawals can be used for qualified educational expenses such a tuition, books, fees and uniforms for expenses relating to elementary, secondary, and college education.

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College Savings Plans Comparison
Find Out Which Educational Savings Plan is Right For You
529 College Savings Plan
Benefits
  • Donor retains control of the account fund
  • Low maintenance
  • Simplified tax reporting
  • Flexible
  • Allows for substantial deposits
  • Funds can be used towards qualified graduate education cost
Do earnings grow tax deferred?
Contributions are made post-tax and are not tax-deductible; however earnings grow tax-free and qualified distributions are tax-free.
Are distributions federal income tax-free?
Yes, for qualified distributions.
What are the gift and estate tax benefits?
Limit is $140,000 for married couples per year without gift taxes. Contributions are removed from the estate.
Ability to change beneficiaries
Yes
Contribution Minimum
Depends on investment plan.
Contribution Maximum
Up to $350,000 maximum in all account balances for the life of the account, depending on state.
What is the impact on financial aid?
Account is measured as a parental asset and is assessed at a rate of 5.64%.
Are withdrawals limited to educational expenses?
Withdrawals can be used for eligible education expenses such as tuition, fees, books, equipment and for limited food and board cost at any college approved by the Department of Education. Some plans allow withdrawals for the cost of graduate school.
Coverdell Education Account (ESA)
Benefits
Can be used towards qualified education costs for elementary, secondary, or college education.
Do earnings grow tax deferred?
Contributions are made post-tax and are not tax-deductible; however earnings grow tax-free and qualified distributions are tax-free.
Are distributions federal income tax-free?
Yes, for qualified distributions.
What are the gift and estate tax benefits?
Contributions are immediately removed from the estate.
Ability to change beneficiaries
Yes
Contribution Minimum
Depends on plan.
Contribution Maximum
Contribution limit of $2,000 per year. Contributions must be made before the beneficiary reaches 18 years of age, unless the beneficiary is a special needs beneficiary.
What is the impact on financial aid?
If the account is in the child’s name, 20% of the assets are counted against financial aid. If it is owned by the parent, it is counted at 5.64%.
Are withdrawals limited to educational expenses?
Withdrawals can be used for eligible education expenses such as tuition, fees, books, equipment and for limited food and board cost for elementary, secondary and college educational cost.

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