Remember when a college education was reasonably priced? In the past 20 years, the cost of college tuition for public universities has risen 165%. College students and their families have been taking on more and more debt, and they are taking longer to pay it off. Recent data bears this out. In 2021, 34% of adults aged 18 to 29 years have student loan debt, making them more than twice as likely as adults in any other age group to have student debt.1,2
Contributions to Coverdell Education Savings Accounts (ESA) aren’t tax-deductible, but the accounts allow individuals to save for education expenses on a tax-advantaged basis, subject to limitations. Contributions to a Coverdell ESA aren’t tax-deductible, but the account accumulates on a tax-deferred basis. In addition, withdrawals are not taxed as they are used for qualified education expenses. Finally, contributions may be made until the account beneficiary turns 18. However, the money must be withdrawn when the beneficiary turns 30, otherwise taxes and penalties may occur.
There are also other alternative educational paths to consider. For example, would your child be willing to complete their first two years of higher education at a community college, then move on to a preferred college or university later? The tuition is often much less at a state community college, and you could realize additional savings if your child attends school while living at home.
1. Usnews.com, September 17, 2020
The content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. Please consult legal or tax professionals for specific information regarding your individual situation. This material was developed and produced by FMG Suite to provide information on a topic that may be of interest. FMG Suite, LLC, is not affiliated with the named representative, broker-dealer, state- or SEC-registered investment advisory firm. The opinions expressed and material provided are for general information and should not be considered a solicitation for the purchase or sale of any security.
Planning for College Education Costs
August 17, 2022