529 PLANS
These are college savings plans that allow you to contribute on behalf of the future student. The contributions are collected on a tax-deferred basis, and they are also exempt from federal income tax when used on qualified educational expenses.
COVERDELL EDUCATION SAVINGS ACCOUNT (CESA)
This is a special educational investment account you can contribute to until a child turns 18. It has some tax benefits, but the maximum contribution is $2,000 per year. A CESA can be used for elementary, secondary, and college expenses and tuition.
CUSTODIAL ACCOUNTS (UTMA)
This allows you to make an irrevocable gift to an account for any child. He or she will ultimately control the funds at age 18 or 21 (depending on state law).
TRADITIONAL OR ROTH IRAS
You can make penalty-free distributions from IRAs for eligible educational expenses for you, your children, and your grandchildren. In some cases income taxes may be assessed. IRAs are not considered assets for financial aid calculations, but withdrawals are counted as financial aid income for parents.
OTHER POTENTIAL OPTIONS
- Financial aid from federal and state governments
- Work-study programs or a part-time job for the student
- Loans from private, federal, and college sources
- Scholarships and grants from different sources
- Family gifts