Parents who've saved money faithfully for their child's college education find out that another family, with the same annual income but no savings, is eligible for more financial aid than they are, says Perreault, who recognizes the perceived savings disincentive built into the current system. In response, the College Board and college aid administrators have developed a better method of assessing a family's ability to pay, she says. This change in methodology is designed to prevent a family's being penalized after saving conscientiously for college. Savings incentives recently have become a higher priority for legislators as well, says Perreault. Although the contribution is not tax deductible, amounts deposited in the accounts grow tax free until withdrawn.
Many parents think they are going to pay for it out of current income.
She urges families to start planning when children are newborns by investigating any tax deferred savings plans or prepaid tuition plans available to them. Parents need to assess all the other costs as well. Perreault also advises parents to look at tuition prepayment or state savings plans closely to find out if there is a penalty if your child opts not to attend college after all. The best way for parents to approach saving for college is to take time to explore existing information on college funding, says Perreault. We can help parents fine tune the details of paying for college once they have a clear understanding of the costs involved, the amount of the financial aid offer and the extent to which they can contribute.