• Home
  • About Us
    • Our Team
    • Our Mission
    • Testimonials
    • Service Areas
  • Services
    • Tax Services
    • Audit & Assurance
    • Accounting
    • Litigation Support
    • Valuation Advisory
    • Forensic Accounting
    • Business Consulting
  • Resources
    • Client Center
    • Online Tools
    • Important Sites
    • Timely Opportunities
  • MBA News
  • Careers
    • Senior Tax Accountant
    • Tax Manager
    • Bookkeeper / Accountant
  • Contact Us
  • Facebook
  • Google+
  • Linkedin
  • Savvy
  • Twitter
  • Home
  • About Us
    • Our Team
    • Our Mission
    • Testimonials
    • Service Areas
  • Services
    • Tax Services
    • Audit & Assurance
    • Accounting
    • Litigation Support
    • Valuation Advisory
    • Forensic Accounting
    • Business Consulting
  • Resources
    • Client Center
    • Online Tools
    • Important Sites
    • Timely Opportunities
  • MBA News
  • Careers
    • Senior Tax Accountant
    • Tax Manager
    • Bookkeeper / Accountant
  • Contact Us

Blog Post

Education planning: It’s best to start early

03 Feb 2016
Comment are off
MBA Site Administrator
Education Planning in St Petersburg Florida

The increasing costs of higher education have made education planning an important aspect of personal financial planning. However, because the actual expenditure will not be incurred for many years, it is often given a low current priority. Also, some parents are counting on scholarships to cover the cost of their children’s education. Unfortunately, this tendency to postpone the issue may eliminate several education planning strategies that must be implemented early to be effective.

Escalating costs. Although the increase in the cost of attending college has slowed down to its lowest escalation rate in years, the College Board reports that 2014–2015 tuition and fees continue to rise at a rate faster than the consumer price index (www.collegeboard.com). All told, the cost of a college education is staggering, and this is unlikely to change.

According to the College Board report, for one year of full-time study, private four-year colleges rose 3.7% (to an average cost of $31,231) from 2013–2014 for tuition and fees alone. Average total charges with room and board are $42,419. Public four-year colleges are up 2.9% (to an average of $9,139) from last year for in-state tuition and fees — room and board adds on another $9,804. Public four-year colleges are up 3.3% (to an average of $22,958) from last year for out-of-state tuition and fees. Average total charges with room and board are $32,762. Even tuition and fees at public two-year schools are up 3.3% (to an average of $3,347).

The report indicates that the subsidies provided to full-time undergraduates at public universities through the combination of grant aid and federal tax benefits averaged $6,110 in 2014–2015 —far below the actual cost of attending.

Six methods to pay for college. In general, the six basic methods of paying for a child’s higher education include a child working his or her way through school; obtaining financial aid (scholarships and federal loans); paying college expenses out of the parents’ current income or assets; using education funds accumulated over time; obtaining private loans; and grandparents (or others) paying college costs.

The first method (child pays) can work, and many successful persons have obtained a good education while working to pay their way. But this often limits the student’s choice of schools and can adversely affect grades. Planning to rely on financial aid (the second method) is risky, and the family may not qualify for enough. The third method (parents paying out of current income or assets) works for some, but many parents will not know if their current income and/or assets will be sufficient until it is too late. In addition, this method is not as tax-efficient as some strategies used to accumulate separate education funds (the fourth method). However, these strategies are not without risks. Poor investment choices could prove costly. The fifth method (private loans) can result in a serious debt burden. Obviously, the sixth method is ideal, but it is not available to many.

How grandparents can help. Grandparents, as well as other taxpayers, have a unique opportunity for gifting to Section 529 college savings plans by contributing up to $70,000 at one time, which currently represents five years of gifts at $14,000 per year. ($14,000 is the annual gift tax exclusion amount for 2015.) A married couple who elects gift-splitting can contribute up to double that amount ($140,000 in 2015) to a beneficiary’s 529 plan account(s) with no adverse federal gift tax consequences. As an added feature, money in a 529 plan owned by a grandparent is not assessed by the federal financial aid formula when qualifying for student aid.

Conclusion. The key to effective education planning is to start planning and saving early to create future options. In addition, the use of tax-sheltered investment and savings vehicles like a 529 plan can help ensure adequate funds are available when a child enters college.

© 2015

About the Author
McClanathan, Burg & Associates, LLC. is a full service accounting firm. Our team members provide services including: Tax, Audit, Assurance and Accounting, Estate and Trust, Forensic Accounting, Litigation Support and Business Valuation.

Social Share

  • google-share

Search

RECENT NEWS

  • IRS Extends the Tax Filing and Paying Deadline for Individuals
  • Do you know the tax impact of your collectibles?
  • Making 2017 retirement plan contributions in 2018
  • When an elderly parent might qualify as your dependent
  • AMT Calculations: It’s Showtime

Categories

  • MBA Events
  • MBA News
  • Opinion & Editorial
  • Resources & Tips

Archives

  • March 2021
  • February 2018
  • January 2018
  • October 2017
  • September 2017
  • August 2017
  • July 2017
  • June 2017
  • May 2017
  • April 2017
  • March 2017
  • February 2017
  • January 2017
  • December 2016
  • November 2016
  • October 2016
  • September 2016
  • August 2016
  • July 2016
  • June 2016
  • May 2016
  • April 2016
  • March 2016
  • February 2016
  • January 2016
  • December 2015
  • November 2015
  • October 2015
  • September 2015
  • August 2015
  • July 2015
  • June 2015
  • May 2015
  • April 2015
  • March 2015
  • February 2015
  • January 2015
  • December 2014
  • November 2014
  • October 2014
  • September 2014
  • August 2014
  • July 2014
  • June 2014
  • May 2014
  • April 2014
  • March 2014
  • February 2014
  • January 2014
  • November 2013

Social Media

Facebook
Linked In
SavvyCard
Twitter

“Best
Congratulations to this year's honored business!
Featured in the Tampa Bay Times.
Click here to view my profile >>

Categories

  • MBA Events
  • MBA News

Archives

Sign Up For Newsletter

First Name:
Last Name:
Email Address (required):
Company:
Phone Number:
© 2014 McClanathan, Burg & Associates, LLC | Website Design by ThinkTankConnect.com

Send to Mobile

Text or Email McClanathan, Burg & Associates online business card to your mobile device using the form below
From the card you will be able to:
  • Get turn by turn directions to the company's office
  • Access a visual company directory of employee cards
  • Call, email or text the company
  • Share/Refer the company to others
  • Save the card to your phone's home screen for future access