Soaring College Cost And 529 Tax
With graduation less than two months away and college financing already secured, Blades has an advantage over many Alabama high school seniors scurrying to snag the few scholarships and loans available. But hope is not lost for those who waited until the last minute to apply.
Don't think just because it's April that all scholarships are gone.
The key is knowing where to look. Seniors still hunting should contact colleges on their list again to see if students have declined any offers, opening up scholarships for others,. They may also want to consider colleges not on their initial prospect list, check out low-interest loan programs or surf the Web for scholarship prospects.
Soaring college costs - tuition and fees exceed $2,000 a year at Alabama public universities - have more parents seeking help. Emily Smith said she and her husband, David hired a consultancy firm to help their daughter nearly two years ago because they didn't feel comfortable searching the Web. College, Page 2C 1C
Jordon Smith, who has a 4.2 grade-point average at Briarwood Christian School, has scholarship offers from five colleges, including her preferred choice, Samford University.
Parents can remove much of the college financial burden by taking advantage of prepaid state tuition plans, said Joseph Hurley, a New York certified public accountant and author of The Best Way to Save for College: A Complete Guide to Section 529 Plans.
Section 529 is the federal tax code allowing Alabama and other states to set up tax-deferred tuition savings plans. Alabama's 10-year-old Prepaid Affordable College Tuition program, or PACT, is one of 46 in the country.
Section 529 plans beat all other college funding options, including Education IRAs, savings bonds and investment accounts through brokers.
The greatest benefit about Section 529 plans is that the money paid in grows tax-deferred. When you do withdraw the money, you're taxed at the child's tax bracket. It's a great way to budget your child's college expenses.
State Treasurer Lucy Baxley, who coordinated Alabama's PACT program, advises parents to start saving for their children's college education as early as possible. Parents enrolling a child under age 1 for PACT this fall will pay $9,184 over the life of the contract. The parent of a child in the ninth grade this fall will pay $13,023.
Good preparation for college is crucial "because tuition and fees account for only about one-third the total costs of a college education."
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