Are 529 Plans a Good Idea in this Market?

A 529 Plan is a way to save money for college that can give you some tax breaks. Many people have been worried about investing with the recent market fluctuations. If you already have a 529 plan, you may be worried about your balance dropping with the market. If you are in the process of saving, you may take this time to decide, under the advice of a financial advisor, if you are more comfortable investing in more stable entities or if you are okay with the fluctuations in the long run.
Some people may have been advised to invest in risky stocks because they had a long time to save for college. This is not necessarily bad advice, if you have a high risk tolerance. If it makes you squeamish to see your balance rise and drop dramatically, you may choose to invest in something a little more stable, such as a mutual fund invested in stocks and bonds. This is the area of investing that a lot of long-term investors end up in.
Not many people are willing to watch their investment plummet with the market. Some may have loved being more daring back before 2000, but maybe not so much now. With over 100% returns, many people were just throwing money into risky investments, with wide blind eyes. You have to look at long term results and understand that these results are achieved by fund managers over time. There may have been some major fluctuations up and down during the years that you are looking at. Mutual funds with stocks and bonds give you some risk so that there is potential for faster growth than a bond fund, but that does not necessarily mean that there will be more growth than a bond fund.
If you are getting closer to needing the money in the 529 plan, then you may want to go even more conservative and stick to mutual funds invested in bonds. Bonds can even be backed by the government. Since the government has taxing power, the chance of government bonds losing money is very slim. These types of funds can be fairly stable.
Bond funds offer dividend payments that can be reinvested into your plan. This may or may not be the best thing for you, depending on your tolerance and also your time frame. Generally speaking, if you have many years to save, then some risk can usually be afforded because you have time to wait out the market lows. The fluctuations can be worth it and sometimes really pay off if you have a stomach for your money constantly rising and falling.
Talk with a financial advisor about assessing your risk tolerance before you decide where to invest your money. The 529 plan is a great way to save money and get some tax breaks. You can even get tax breaks if your plan loses money, deducting the loss of principal from your income. These benefits combined with scholarships, grants, student loans and private student loans can help you get your child through college.

About the Author: Evelyn Saunders, a retired teacher, is the editor for student-loans.net, a provider of student loans and information on how to get private student loans as well as consolidation. For more information, please visit http://www.student-loans.net.

Investing for College Basics

Many people are really not very experienced when it comes to investing for college. It does not have to be hard or confusing if you just follow some simple guidelines.
The first rule of the stock market is that it is going to fluctuate up and down. Most ordinary investors stick to mutual funds, which helps them spread their money around over many investments at once, keeping the eggs out of one basket, so to speak. Mutual funds are a fairly easy place to start learning how to invest.
Saving for college is a good way to learn how to invest as well, especially if you start early. Let’s say that you have fifteen years to save for that first year of college. That gives you almost twenty years before the last year. This is a very long time to invest. You will likely see the stock market jump around wildly, reaching new highs and new lows along the way. Your balance will reflect the fluctuations.
Some people have been scared to put money into their college investments lately, since the market is at a very low point. People generally get excited when their balance goes way up and they throw more money in. This is really the opposite of what would be the most profitable, so you have to learn to keep your head on straight in times of high and low markets.
If the market is up really high and the returns are looking incredible, this is also when the investment is at its most expensive, getting you less shares for more money. When it is really low and scaring people off, that is when it is at its cheapest. You have to keep your eye on the prize.
The market fluctuates with emotions as well as the economy. Even savvy investors find it hard to buy low and sell high. They may see numbers rising and want to get in on the action, driving it even higher. When a lot of them do it at once, they can inflate the value of something beyond what it is really worth. Then they all sell, sell, sell and drive it back down. If it goes wildly high when people are excited, this does not necessarily mean that the stocks are really worth what people are paying, and eventually there should be a correction. If it is really low because of fear, then eventually it may correct back to what it is really worth. That is, if investors pulling out do not bankrupt the company.
With a general understanding of the market fluctuations, you will need to determine how much risk you are willing to take with your money. In general, the longer you have to save, the more risk you can afford to take. But, if you can’t sleep at night or it makes you sick to watch your balance plummet, then you may want to consider safer avenues that still have potential for growth. Mutual funds that have a balance between stocks and bonds can be a little more stable while still allowing growth. As you approach college, you may want to move into safer investments, such as all bond funds, getting you out of the fluctuation game all together.
Talk with a qualified financial advisor about the best way to put your children through college. Save as much as you can as often as you can. Keep your credit clean so that you can get the best terms and rates on student loans if they become necessary. Take the time to plan out college savings and it could really pay off.

About the Author: Evelyn Saunders, a retired teacher, is the editor for student-loans.net, a provider of student loans and information on how to get private student loans as well as consolidation. For more information, please visit http://www.student-loans.net.

529 Plans and Student Loans

Saving for college is always a good idea. Some people start with a regular savings account through their bank. Others choose to invest in mutual funds or other security. There are some state sponsored plans that can help you get the best tax benefit for your money.
These state plans are referred to as qualified tuition plans, 529 plans or 529 programs. The money you put in is actually invested, so there is some risk. This is much like a 401K plan where your contributions are invested. Every state in the US offers at least one 529 plan. If you invest in a Texas 529 plan, live in Alabama and your child chooses to go to school in New York, you can still use that Texas sponsored 529, as long as the school your child is attending qualifies. Basically, the 529 savings plan has to be used at an accredited school. Check online for eligible institutions before you choose a school.
There is also a prepaid 529 plan that works a little differently. This program allows you to prepay for college tuition in-state. If your child decides to go to school out of state, then all is not totally lost. You can transfer your prepaid 529 to another state, but depending on the state, you could end up losing part of your money.
Colleges can offer their own 529 plans. If you choose to prepay for a specific institution, make sure that you know what terms you are agreeing to. There may be special restrictions about transferring to another school.
The best thing about 529 plans is the tax breaks. State tax breaks can vary from state to state, so check with your state to get the facts. Many states offer a state tax deduction for contributions that you make to the plan. You will not get a federal tax break on the contributions, but your earnings will grow tax-deferred.
You remain in complete control of the 529 account. The money is not in the child’s name and you can take it out whenever you wish. If you use the distributions to pay for college tuition, the distributions are federally tax-free. Your state may also let you have tax-free withdrawals, but this depends on the state. If you want to take the money out and use it for something other than college, then the distribution will be a taxable event, federally and from your state. Additionally you will be charged a 10% penalty for withdrawing for something other than school.
Most people do not end up saving near enough for college and start looking for other forms of financial aid. There are a lot of special benefits and terms for college students who need to take out student loans or private student loans. Do your research and college could be easier to pay for than you planned.

About the Author: Evelyn Saunders, a retired teacher, is the editor for student-loans.net, a provider of student loans and information on how to get private student loans as well as consolidation. For more information, please visit http://www.student-loans.net.

Saving for College

College is expensive, it is no secret. Most parents want their child to have the best chance in life and college is a part of that plan. Millions of parents will struggle to afford college for their child. If you have more than one child, it can be even more important to start saving now.

With the cost of college reaching staggering amounts, many parents wonder if it is worth it. Statistics show that college educated men and women earn up to eighty-five percent more money throughout their lives than their high school educated peers. Consider your child’s college education an investment, not necessarily an extra expense.

Grants and scholarships are your first stop when figuring out how you are going to pay for college. These are not guaranteed and should not be counted on when you are making your savings plan. Time is your best asset when saving. Even very small amounts can grow to substantial sums over a few years time. Save whatever you can now and it could really pay off in the future.

Some people have a plan to pay as they go. This can work if you have both parents making a substantial salary and you are able to dedicate one salary to college. Many parents are under the impression that their child can work their way through college. It is true that many students are able to hold down part-time jobs, but the money made is generally trivial and most students’ grades will suffer if they have to work when they need to study. It really is unrealistic to think that your child will be able to contribute much to their education expenses.

Another option is to borrow now, pay later. Student loans and financial aid can be very helpful. Over half, almost two-thirds, of all students in college have financial aid and student loans to get them through. Many parents can take on some loans themselves to help lighten the burden on their children. Some throw caution to the wind and leave everything up to student loans in their child’s name. Consider how much debt your child will be starting their life with. The final amount after four years of college is in the hundreds of thousands of dollars range. This amount can be like owing one or two hefty mortgages before they even consider buying a home. Many people are well into their thirties before they are able to pay off their student loans. What if your child marries someone with just as much debt? The burden can be extremely overwhelming and unmanageable. You need to do what you can now to lighten the load.

Parent loans, grants, scholarships, financial aid and private student loans are usually combined to spread the responsibility around so that no one person is overwhelmed by the whole amount. Many people would never be able to afford college if it were not for student loans, so they are most likely going to be part of your consideration when the time for college approaches. Save as much as you can now to help out your family for the future. If you do need student loans or private student loans to get you over those inevitable humps, shop around on sites that let you compare benefits, rates and flexible terms before you commit.


About the Author: Evelyn Saunders, a retired teacher, is the editor for student-loans.net, a provider of student loans and information on how to get private student loans as well as consolidation.

Saving for college

Saving money for the college years is simple in theory, but can sometimes prove to be a more complicated endeavor to put into practice. Obviously, if you are able, start saving early and contribute to that savings on a consistent basis.
Getting started, it is wise to do some research on current tuition and housing costs as well as taking into consideration the approximate effects of inflation between now and when your children will actually begin their college careers. This will allow you to arrive at an approximate per semester or per year goal per child. Next, calculate the amount you will be able to comfortably contribute on a regular basis taking into account the time span between now and high school graduation. Now is the moment of truth. Will your contributions match or exceed the approximate amount required? If the answer is yes, well that is great news. Put the battle plan into place and keep feeding those accounts consistently.
If the answer is no, as it is for many of us, stick to the plan anyway, make the contributions you can and start researching alternate ways to supplement the approximate savings you will have in place. Student loans come in several different varieties. Finding the right student loan to fit your needs and situation can often be a logical solution.
Federal Student Loans are generally affordable, with reasonable interest rates and deferred payments. Depending on your needs and how you qualify a Federal Student Loan, it may fill in the financial gaps in funding the education of your children. For each student, their financial situation and that of their parents is taken into account when they apply for Federal Student Loans. If what you have found in the realm of Federal Student Loans has not yet solved your funding issues, a private student loan might be right for you and your children.
A private student loan can be the perfect option when federal loans and other financial aid options have not come through at all or if they have simply fallen short of the financial demands of college education and living. Applying for a private student loan can be done online and is a fairly simple and quick process. A student with no credit history can still qualify for a private loan with the assistance of a qualified cosigner who has established good credit. When a private loan has been approved, the funds are sent directly to the student.
Planning ahead is great, but when the financial demands of a college education outweigh the best results of your planning, supplementing your education budget through federal or private student loans is a functional and logical Plan B.

About the Author: Evelyn Saunders, a retired teacher, is the editor for student-loans.net, a provider of student loans and information on how to get private student loans as well as consolidation. For more information, please visit http://www.student-loans.net.

Reasons you may not want to save for your children’s college

It goes against everything we are told, to save for our children’s college, starting when they are young. The truth is, it's fiscally irresponsible to spend your retirement money on your children's education.

We all know college can be very, very expensive. With that, we tell ourselves that we'd better start saving if we want our kids to get an education and a good job. Private colleges currently cost more than $25,000 per year, and even in-state public universities cost more than $12,000 per year. Few people can fork over that kind of money without planning ahead.

But are we really in deep trouble if we don't have a college fund set up for our 5-year-old? How should we balance saving for college with other financial goals?

Sometimes, putting money into education funds is not the best use of your money. Here's why:

• You can't get a loan for retirement
• Other financial goals come first. It's heresy to some, but it's true: Your retirement plans are more important than your children's college funds. Your kids can get through college somehow, and you will probably find a way to help them, but it's more important to plan for your retirement. Remember, your kids can get student loans, but there's no such thing as a retirement loan.
• If you have to choose between putting money in the kids' college funds and buying a house, buy the house. You may be able to pay tuition with a home-equity loan when the time comes.
• Education funds are not always the best way


Typical education savings plans may have drawbacks, such as:

• Limited investment options. Many education funds pay only interest; others let you invest in the stock market. You can't use the typical education fund to invest directly in real estate or start a small business, for example. Compare the rate of return you expect with what you could receive in alternate investments.
• Difficulty predicting future tax benefits. Tax rules change, and it's hard to predict future income levels. Sometimes by the time kids reach college age, their parents' income level is too high for certain tax advantages they'd been counting on.
• Financial aid considerations. Students are expected to contribute a higher percentage of their savings to their college education than their parents, so placing money in your child's name may hurt their chances of getting financial aid. You may be better off keeping the money in your name.

If you want your child to appreciate the investment in their education, working with them in helping pay for their own college can have its benefits. Every year a number of freshmen trek off to college on their parents' hard-saved money, only to spend more time the first few semesters partying than studying. Would they crack the books more if they were paying the bill? Even the most responsible kids seem to do better in college when they help pay for it.

Students can start at a community college at relatively low cost. In California, for example, the annual cost for tuition, books and supplies at a community college is about $1,500. After two years, students can transfer to a four-year college and graduate with the same degree as students who started there.

Recent trends, such as taking courses online or getting college credit before graduating from high school, can also help cut the total cost of a degree.

If you decide to set up education funds for your children, ask your tax professional about the options that will give you the most flexibility and the best after-tax return for your situation.

Remember to pay attention to your own overall financial picture first, however. It's a good idea to keep some investments accessible for projects such as paying college tuition, but designated college funds are not the only way to go. Whatever your family's needs may be in the future, the best way to be sure you can meet them is to make sure you are on the right track for all your financial goals.

About the Author: Evelyn Saunders, a retired teacher, is the editor for student-loans.net, a provider of private student loans and information on student loans and consolidation. For more information, please visit http://www.student-loans.net