quick clicks

moms today articles

moms today q&a

message boards

research baby names

prepare a birth plan

content channels

ip channel rss feeds

read birth stories

read parenting stories

recommended books

e-newsletters

safety recalls

ip diaries

ip store

mom of the month

dad of the month

editor's letter

letters to the editor

Financing College

Where to Put Those Hard-Earned Bucks

By Felicia Hodges

There are two tax credits the IRS allows for education. The Hope Credit gives a $1,500 credit per freshman or sophomore student on your taxes, if at least $2,000 was spent on tuition. The Lifetime Learning Credit is a $1,000 credit per family that can be used during undergraduate or graduate studies. You can only use one credit or the other, but not both.

Many states offer these plans in the way of guaranteed savings programs that either let you pre-pay your child's education at today's tuition prices or contribute funds to an account within the program that invests the money (usually in mutual funds) and generate a variable rate of return. Some, such as New York's College Choice Program, let you transfer the investment to any accredited college or technical school in the country while others, such as the Florida Prepaid College Program, let you pay for tuition and expenses such as room and board that will be good at any university in the state. According to CPA Robert Mayoh, Florida's program, which is fully backed by the state and allows guaranteed refunds and transfers to other siblings, was the first of its kind in the country and has had almost 600,000 enrollees to date.

"When it comes to savings for public higher education, you can't beat plans like these," Mayoh says.

Uniform Gift to Minors or Uniform Transfers to Minors Accounts
These allow you to contribute up to $10,000 ($20,000 for married couples) tax-free every year to an account in your child's name. You are the custodian of that account. Until the child is 14, part of the account is taxed at the child's lower rate while a portion is taxed at the parent's rate. The child gains full control over the assets once he or she reaches age 18 (or 21 in some states). However, funds in your child's name can reduce his ability to qualify for financial aid. "Generally, assets held in the name of a child are considered more heavily than assets in a parent's name in determining financial aid eligibility," Keister says.

Want to see more?

• Financial Finesse. Through national seminars, a radio show and its Web site, this company helps educate women on how to better invest and save money, including saving for their children's education.
• Check out the answers to other financial questions in our lifestyle section.
• Wired Scholar. An inclusive online resource for college preparation that features evaluation, selection, application and financing.
• The College Savings Plan Network. Online resource listing specific information about state college savings plans.
• The Dads' Place Discussion Board