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October 30, 2006 at 16:40:50

529 Savings Plans, Trick or Treat?

by Reecy Aresty Page 2 of 3 page(s)

www.opednews.com

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1. Cost of Attendance = $45,000 (COA=Tuition, fees, room & board, books and related expenses)

2. Expected Family Contribution = $ 10,000 (EFC=the minimum the federal government determines a family will pay at any college)

3. Financial Need (FN) $ 35,000 ($45,000 - $10,000 (FN=the maximum amount of aid a family will qualify for)

4. The student qualifies for the following aid:

(A) $ 3,500 Stafford Loan
(B) $ 4,000 Perkins Loan
(C) $ 2,500 Federal work-study award
(D) $ 3,000 State grants, etc.
(E) $ 2,000 Private scholarship
(F) $20,000 College scholarships, grants, tuition waivers, etc.
(G) $35,000 Total

The student will qualify for a maximum of $20,000/yr in financial aid from the college. However, the private scholarship is a bonus for the school, not the student. It enables them to reduce their aid dollar for dollar, because if (E) were $0, (F) would be $22,000.

Scenario B: $ 50,000 in a 529 Savings Plan

The COA is $45,000, less an EFC of $11,000, equals an FN of $34,000. The student qualifies for the following aid:

(A) $ 3,500 Stafford Loan
(B) $ 4,000 Perkins Loan
(C) $ 2,500 Federal work-study award
(D) $ 3,000 State grants, etc,
(E) $21,000 College scholarships, grants, tuition waivers, etc.
(F) $34,000 Total

With $50,000 in the 529 Savings Plan, the family will most likely take a "qualified" distribution of $12,500/yr for 4 years; $11,000 of which, will pay their EFC. The college saves and the family will lose $1,500/yr in financial aid for 4 years. The college's contribution (E), will now be reduced to $19,500

Scenario C: $100,000 in a 529 Savings Plan

COA = $45,000 - an EFC of $2,800 = an FN of $32,200. The student qualifies for the following aid:

(A) $ 3,500 Stafford Loan
(B) $ 4,000 Perkins Loan
(C) $ 2,500 Federal work-study award
(D) $ 3,000 State grants, etc.
(E) $19,200 College scholarships, grants, tuition waivers, etc.
(F) $32,200 Total

With $100,000 in the 529 Savings Plan, the family will most likely take a "qualified" distribution of $25,000/yr for 4 years; $12,800 to pay their EFC.

The college will save and the family will lose $12,200/yr in financial aid because $12,200 of the aid the college would have offered was replaced by the 529 distribution. The college's contribution (E), will be reduced to $7,000.

If the money were in a financial vehicle not included in the financial aid calculations, the EFC would be reduced to $10,000 (Scenario A), and they would qualify for $22,000/yr for 4 years in financial aid from the college.

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www.paylessforcollege.com

Reecy Aresty has been a financial advisor since 1977. He has authored the critically acclaimed, "How To Pay For College Without Going Broke," an invaluable, parent/student admissions/financial aid manual. Arguably the most revealing book ever written on the subject, it is the only book of its kind also available in Spanish. In a career spanning more than three decades, Reecy has helped thousands of families send their kids to the school of their choice for less than they ever dreamed possible. Reecy has been interviewed by financial experts on radio and television, and by many of the nation's most respected publications including Money Magazine, US News & World Report, Bloomberg News, Scripps Howard, The Washington Post, Terry Savage (personal finance columnist for the Chicago Sun Times) and Consumers Digest. Recently, Reecy created The College Information Network™ including The High School Blog, The College Blog, Payless For College and The Way To College dot coms. A Google search for "Reecy Aresty" will result in thousands of links to sites all over the world that feature his articles, advice and methods. Reecy presents free seminars coast to coast, and his innovative appeal/negotiating techniques have turned unappealing award letters into millions of dollars of additional financial aid. Reecy's book is a warehouse of information that makes it possible for virtually any family to beat the colleges and the federal government at their own game. For further information contact Reecy Aresty at: 561.477.9639, or visit www.paylessforcollege.com, and never loose sight of the fact that, "The money to send a student to college IS available. Paying for college is the easy part. Getting admitted is the tough part. All the financial aid in the world is useless without an admission ticket."