Education

Some colleges now offer prepaid tuition plans. Generally, you agree to pay a lump sum amount today and, in exchange, the college will guarantee your child four years of already prepaid education. Earnings on the plan's investments are tax-deferred. When the plan pays the tuition benefit, the difference between the purchase price and the benefit will be taxed. If the funds are used for qualified higher education expenses, the investment earnings will be included as part of the beneficiary's income, therefore the earnings will be taxed at the student's usually lower tax rate rather than the purchaser's usually higher tax rate.

Some colleges are using billing agencies to administer monthly payment plans for tuition, room and board and books. Generally, you pay a nominal yearly fee ($25-$75) and then monthly payments prorated for projected, annual expenses. This plan is available for parents that can meet monthly cash flow payments, but do not have sufficient education savings. Check with the college's Accounting Office to determine if this type of plan is offered.

Generally, taxpayers can now put up to $2,000 a year into one of these educational investment retirement accounts. Contributions to such an account are not tax-deductible, but earnings in the account will accumulate tax free. No tax liability will be incurred on withdrawals if the money is used to pay college education expenses. For the current year, the full $2,000 contribution is available for joint filers whose Modified Adjusted Gross Income is less than $220,000 and single filers with Modified Adjusted Gross Income less than $110,000.

Generally, you should consider consolidating if there currently are lower interest rates available with minimal or no loan origination fees. Also, verify that there are no penalty fees on the old loans for pre-payment. Other reasons to consider when consolidating is whether you will have trouble keeping track of, or paying, the monthly payments. Stretching the term of the loan will lower the monthly payment, but will increase the total interest cost over the term of the loans. Speak to your local CPA to see if loan consolidation is beneficial for you.

Under the current needs analysis methodology approved by the U.S. Congress, the value of your retirement plans (401K, IRA's etc.) is not considered an asset and not reportable. Money you save in your child's name is counted as an asset and reduces your eligibility for financial aid.

The federal FAFSA financial aid analysis no longer counts the equity in your primary residence as an asset. However, many independent, private schools ask this information when making their own financial aid determinations.

The total costs will vary substantially from school to school. As a general overview, the net cost to you each year will be the gross costs of tuition, room and board, fees, books, supplies, transportation, extra spending money, minus federal and/or state financial aid, scholarships, grants, awards and loans. Generally, financial aid and loans are paid back 6 months after the student graduates or leaves school. Generally, scholarships, grants and awards are monies given that are not required to be paid back. Generally, the better the student's grades, SAT's and/or ACT's and outside activities are, the higher the scholarships, grants and awards that may be offered. The sticker price of studying and living on campus at the average public university rose 5.4% for in-state students, or about $1,100, to $21,447 this fall, the College Board estimated. The chief cause of that increase was a dramatic spike in tuition and fees at hundreds of public universities. Tuition at the average public university jumped 8.3% to $8,244. Fewer than half of all public university students pay the full sticker price to attend. Federal surveys show at least 52% of all students at public four-year universities receive scholarships or grants. Aid, not counting loans or campus jobs, brought the net tuition paid by the average student at a typical public university to about $2,500, the College Board estimates. That brings the total average net cost of a year on campus (including dorm, books, travel and living expenses) to $11,400

The Financial Aid Form (FAF)is a form that asks for more information than the FAFSA form. Some private colleges and universities require the completion of this form.

The PSAT in year 2011 are given October 12 and October 15. Verify these dates with your High School guidance counselor.