College Planning

Education Savings Accounts

Parents or grandparents can now contribute up to $2,000 per year, per child under age 18. The phase-out limits are married filing joint $190,000 - $220,000, and for single filers $95,000 - $110,000. Generally, contributions can be made up to April 15 for the previous year. 

Tax-free withdrawals of funds can be used to pay for elementary, secondary, or higher education. The government does not tax the appreciation on the funds. The investment decisions are totally controlled by the donor. Contributions are not tax-deductible.

Funds must either be used by the time the beneficiary reaches age 30 or transferred to an educational saving account for a younger family member.

Section 529 Plans

Contributions up to $85,000 per child can be made with no gift tax implications if the donor elects to treat the gift as made over five years. There are no limits on the donor’s taxable income. 529 plans have maximum funding caps per child. The cap will vary by state plan but will be in the $250,000 range.

Withdrawals are tax-free to fund higher education. The Tax Cuts and Jobs Act expands qualified distributions made after December 31, 2017, to include up to $10,000 in elementary and secondary tuition per student per year. The donor may choose government directed age-based portfolio investments with greater choice and control. Specific investment options are determined by the plan sponsor. The donor can choose one of the fifty state-sponsored plans.

Unused funds in the account can be transferred to a 529 plan for another family member. Non qualified plan distributions are subject to tax and a 10% penalty. If the child/student does not use the funds for education, they can be transferred to an IRA account in the child/student's name. Only $35,000 can be used for this purpose. 

To compare different state’s 529 plans go to

Commercial College Savings Incentives

There are some excellent college credit card reward programs (typically 1% or 2%) and savings clubs programs (up to 10% on purchases) that help you build college savings by contributing a percentage of your purchases to a 529 plan. Compare programs such as Upromise and Baby Mint. Small steps, or in this case baby steps, can lead to big rewards.

For help in determining how much you need to save try the financial calculators on our web site. Select Financial Calculators/Savings Calculator/College Savings.


When deciding on how much financial aid a family gets, the government and colleges look at the assets and income that parents and children have in the years immediately before and during college. Particular attention is paid to the calendar year that runs through December of the child’s senior year at high school. Minimize income, minimize capital gains, and maximize retirement contributions for that year in particular.

There is a wealth of information on the internet regarding funding college costs. Try the Financial Aid Information page and College Board Online, They can answer many of your questions about the financial aid process, including interactive calculators to estimate your expected contribution amounts, and provide search engines for scholarship and loan money. The U.S. Department of Education provides links to many helpful resources at

Things to consider to increase aid:

  • Spend all the child’s assets before the child borrows. Have the child borrow first (even if you plan to pay). They are likely to get better rates on the Stafford loans and can defer payment. Also, your child is more likely to benefit from the new loan interest deduction.
  • Pay off consumer debt such as credit cards and auto loans.
  • Accelerate necessary expenses to a date prior to completing FAFSA.
  • Don’t take money out of your retirement account to pay for education. The retirement assets are sheltered from the needs analysis formula.
  • It may be a mistake to have grandparents gift or pay tuition. Have them wait until after graduation and offer to repay loans.

In addition to need-based aid, try for merit-based aid. To increase your child’s chances:

  • Apply to schools where your child is in the top 25% academically.
  • Apply to schools out of your geographic area. Schools want the diversity and your child may be more likely to get merit-based aid.


Please contact our office for more detailed information and assistance.

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