by Tenielle Shellman, Manager – Central Planning, Wealth Enhancement Group

As kids make their way back to school this fall it is a great time to start thinking ahead to begin planning for future college expenses.

Start planning as early as possible. Consider what you as a family will want and be able to contribute to your children’s education. Is your goal to fund a specific dollar amount, a certain percent or all of the expenses related to a child’s college education?

As hard as it may seem, estimate what the cost to attend college might be or again what your budget might be. Once the approximate cost and funding portion is known you can determine what amount may be necessary to contribute to a savings plan on a monthly or annual basis to meet your funding goal. Your Wealth Enhancement Group Team may be able to help you evaluate this goal in more detail.

Consider contributions to tax advantaged "529 Plans", also known as "college savings plans”. All earnings in these accounts accumulate tax-deferred and earnings are tax-exempt if withdrawals are made for qualified higher education expenses. There may be additional tax incentives on contributions offered by the state in which you live in. For more details you may contact your tax preparer and/or your Wealth Enhancement Group Team.

As students begin to search for schools they should also consider searching and applying for scholarships and grants. School counselors, college financial aid offices and the internet can be helpful resources in finding opportunities such as these. Each institution has its own deadlines for applying for institutional scholarships.

If current cash flow and available savings are not enough, the family can apply for financial aid. Financial Aid comes from 3 main forms: grants, scholarships, loans and work study. Eligibility for need based financial aid is calculated based on the cost of attendance and the expected family contribution. Once the need is determined you may be awarded a combination of different types of aid programs. The earliest you can submit the Free Application for Federal Student Aid (FAFSA) application is January 1 for the following academic year. For some grants and loans you may apply anytime during the academic year you are enrolled. You must reapply each year using a shortened renewal application form.

Equity in your home may be another viable funding mechanism. Current interest rates are favorable and if certain conditions are met the interest may be tax-deductible.

Additional funding sources that may be utilized are Life Insurance Cash Values, withdrawals from traditional IRAs if used to pay for “qualified” education expenses, loans from qualified employer plans and other investment programs. Please consult with your advisor prior to implementing any of these strategies. They each have their own unique disadvantages you must consider.