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Educational Planning

Educational planning is important in today's world. Knowing how you're going to pay for college provides the security of knowing your children will have a stable future without burdening them for years to come with outstanding debts. With the cost of higher education rising and the number of good paying jobs available to those without advanced degrees shrinking it can be daunting to even consider paying for college.

It's easy to feel overwhelmed when starting to look at options to pay for college. Luckily, it's all much simpler than it looks at first glance. It doesn't matter if you're child is starting college next month or just starting the third trimester- any planning put in ahead of time will pay off later. The higher your educational preparedness the better you'll be.

Long Term Planning Simplified

If you've got the time to do your educational planning, there are a number of kinds of savings accounts/investment options to help your planning for your child's college. As with any investment, these work best when started earlier, but even a year or two can make thing easier. Remember the trick is to take advantage of as many educational planning options as possible.

The Holy Grail of educational planning is the 529 account which comes in two styles; Prepaid tuition plan and college savings plan. The important part of a prepaid tuition plan is that it is focused on state residents who want to send their children to in-state public schools. But, it has the amazing advantage of "locking in" tuitions and fees at today's prices. While the money can be used for out of state or private schools, it isn't guaranteed to cover all tuition and fees. Because taxes are deferred until withdraws are made and said taxes are made to the beneficiary rather than who set up the account, it's a fantastically low risk option. If you're committed to sending your children to an in-state public school it's the best option.

A College savings plan is another educational planning option which lets you to put money into a fund to be used at any accredited school in the country and many abroad. They offer much more flexibility for the beneficiary and money in the plan is tax free until withdrawn for educational purposes. The downside is since these plans are tied to the stock market, it's possible to lose money. There is an additional risk when planning with one where companies offering college savings plans don't have to advertise their performance, cost, or risk.

Another way to get tax-deferred money to your child is through a Coverdell Education Savings Account (or ESA). Coverdells work like IRAs, except you save for education instead of retirement. You can deposit up to $2000 a year into a Coverdell; The money put into one grows tax free which continues through withdraw as long as it's used for educational purposes. There are some restrictions beyond the cap on money per year such as couples earning over $190,000 a year cannot put money in a Coverdell, if the money is not used by the time the beneficiary is 30 it is refunded to him or her with some penalties, and money put into a Coverdell isn't tax-deductible.

By figuring out your educational planning needs and picking the right options you can ease your college burden fantastically. But even without 20 years to build up a cushion, there are still ways to get the money to pay for college. Planning ahead is essential.

Other Sources of Educational Funding

Most of us have to resort to some mixture of loans, grants, and scholarships for educational planning. These terms are so often thrown around it's easy to forget exactly what they mean. A loan is an amount of money lent to a person at specific terms and is expected to be paid back. Student loans come subsidized or unsubsidized depending on if the interest will be paid while the student is at college. You want as many subsidized loans as possible. The only thing better than loans are grants, which don't need to be paid back. A scholarship is a grant given to someone who meets certain guidelines.

There are many ways to find any or all of these. Try and get as many scholarships, grants, and subsidized loans as possible, only using unsubsidized loans to cover the balance of your educational costs. Another option for some people might be to work for a company who pays for education.

As you can see educational planning is a tricky but navigable business. Perhaps the greatest challenge in planning is not knowing your child's educational goals ahead of time. As such, it's best to look for as much flexibility as you can in setting long term educational planning goals.

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