EDUCATION PLANNING
College and Education Planning Resources
Recent Education Planning Blog Posts
Comparing college planning vehicles
Understanding the different college planning vehicles can help you choose the right one for your needs.
529 education plan
• Tax-free investing and withdrawals for qualified education expenses (1)
• Account owner control for the life of the account
• No income limits on contributors or age restrictions on beneficiaries
• High contribution maximums, often $400,000 or more per beneficiary (2)
• Low impact on financial aid eligibility
• Assets removed from taxable estate
• Tax-free gifts of up to $160,000 per beneficiary in a single year (3)
Custodial account (UGMA/UTMA)
• Some investment earnings may be taxed at child’s rate, the rest at parents’ rates
• Child assumes control at age of majority, usually 18 or 21
• Funds must be used for the child’s benefit, not necessarily for college
• High impact on financial aid eligibility
• Assets not removed from taxable estate if donor is also custodian
Coverdell Education Savings Account
• Tax-free investing and withdrawals for qualified expenses at any level of education4
• Must generally contribute before beneficiary turns 18 and use assets by age 30
• Income limits on contributors
• Maximum contribution of $2,000 annually per beneficiary
• Low impact on financial aid eligibility
• Assets removed from taxable estate
Financial Aid and College Planning Websites
Federal financial aid
Financial aid for college or graduate school.
Understand the aid process and who's eligible.
529 college savings plans
Promoting 529 college savings plans as a way for families to save.
Start, track and grow your child's
college savings.
College preparation
Access to your PSAT/NMSQT, SAT, and AP scores and more.
College planning, social guidance, and a vibrant community.
Helping people achieve education and workplace success.
All-inclusive test prep for over 185 exams, including SAT, ACT, and AP tests
Grants and scholarships
Free scholarship search and application platform.
Free scholarship search platform that connects students to scholarships and financial aid tools.
Research schools, get scholarships, and understand where you fit.
Information on financial aid for college and tips on how to help ease the burden of college expenses.
Sources of Financial Aid
U.S. Federal Government
Grants and scholarships, Loans, Work study, Tax credits and deductions
In addition to aid from the U.S. Department of Education, scholarships and loan repayment may be available to qualified students through other government entities.
States
Grants and scholarships. (May be available even if families aren’t eligible for federal aid.)
Example: New York’s Tuition Assistance Program offers grants of up to $5,665 per year to eligible residents attending approved New York State schools.
Colleges
Grants and scholarships
Aid may be available for attending a particular college and/or studying specific majors.
Nonprofit or private organizations
Grants and scholarships
Possible sources include charitable foundations, religious and community organizations, local businesses, ethnicity-based organizations, students’ and parents’ employers, civic groups, and professional associations related to a field of study.
Banks, credit unions or other lenders
Private loans
Tend to have higher interest rates and less flexible repayment options than federal loans.
Federal student aid: Loan programs
Lender is the U.S. Department of Education. For more information: studentaid.gov/understand-aid/types/loans
Direct Subsidized Stafford Loans
Undergraduate students enrolled at least half-time and demonstrating financial need.
Direct PLUS Loan for parents
Parents of dependent undergraduate students enrolled at least half-time. Parents must not have negative credit history.
Direct Unsubsidized Stafford Loans
Undergraduate and graduate students enrolled at least half-time, regardless of financial need
Direct PLUS Loan for graduate or professional students
Graduate or professional degree students enrolled at least half-time. Student must not have negative credit history.
Other sources of college funding
Compared to these options, a 529 education plan is usually the better choice. Talk with your advisor.
Roth IRA
Withdraw retirement funds to pay for college.
Life Insurance
Withdraw or borrow against the cash value of a policy to pay for college.
Home Equity Loan
Borrow against home equity value to pay for college.
Private Loan
Borrow from bank, credit union or other lenders outside the U.S. government
Notes and disclosure
1. Earnings on federal non-qualified withdrawals may be subject to federal income tax and a 10% federal penalty tax, as well as state and local income taxes.
New York State tax deductions may be subject to recapture in certain additional circumstances such as rollovers to another state’s 529 plan, or withdrawals used to pay elementary or secondary school tuition, registered apprenticeship program expenses, or qualified education loan repayments as described in the Disclosure
Booklet and Tuition Savings Agreement. State tax benefits for non-resident New York taxpayers may vary. Tax and other benefits are contingent on meeting other requirements. Please consult your tax professional about your particular situation.
2. The Program Administrators impose a maximum aggregate balance of all accounts for a single beneficiary in qualified tuition programs sponsored by the State of New York, which limits the amount of contributions that may be made for any one beneficiary, as required by Section 529 of the Internal Revenue Code. The current maximum account balance is $520,000.
3. Maximum gifts are $160,000 per beneficiary from married couples and $80,000 from single tax filers. No additional gifts can be made to the same beneficiary over a five-year period. If the donor does not survive the five years, a portion of the gift is returned to the taxable estate.
4. Earnings on non-qualified withdrawals may be subject to federal income tax and a 10% federal penalty tax, as well as state and local income taxes.
Content source credit: 2022 Edition of “College Planning Essentials” from J.P. Morgan.
Investments Are Not FDIC Insured | No Bank Guarantee | | May lose Value