Catalyst For Children | Affording College

About 20 million students are expected to attend American colleges and universities in 2019, with around 6.7 million going to two-year and 13.3 million going to four-year institutions. Paying the full tuition and other expenses for four, and often more, years of college can add up to a substantial price tag. Fortunately, there are a variety of strategies that can make getting a college degree more affordable.

Depending on where you go a free or low-cost college education is possible
Let’s start with the best deal, free tuition, and sometimes free room and board, too. More than 60 colleges do not charge tuition, including the service academies (Army, Navy, Air force, Coast Guard, and Merchant Marine). Unlike the service academies that pay for everything, some of the free tuition colleges require paying for room and board and some have work requirements. Other of these no-tuition institutions are very specialized, such as Philadelphia’s Curtis Institute of Music, and require a high level of a particular talent to get in.

Usually there is difference in costs between public and private colleges and between two-year and four-year schools. Community colleges are primarily two-year public institutions but some also award four-year degrees and there are private community colleges. According to Community College Review the average cost of community college is $4,864 (in-state) and $8,622 (out-of-state) per year for public community colleges. For private community colleges, the average tuition is around $15,460 per year.

Many public colleges have a two-tier system and charge substantially less for in-state than for out-of-state students. Schools in some regions tend to be less expensive. Colleges in the South have the lowest public four-year tuition, those in the West have the lowest average tuition for public two-year schools and schools in New England tend to be more expensive for both two-year and four-year public colleges. Half of all full-time undergraduate students at public and private nonprofit four-year colleges attend institutions that charge tuition and fees of $11,814 or less.

Besides tuition and fees, students have to pay for housing, food, books and supplies. They also have to cover any additional college fees and other living expenses, such as transportation costs. It is good to keep in mind that when room and board are included the total cost in higher. The College Board’s annual Trends in College Pricing publication reports an average cost of attendance (tuition, fees, room and board) in 2017-2018 of:

Another estimate is even higher, with an average total cost of public colleges: $25,290 (in-state) $40,940 (out-of-state), and average total cost of private colleges: $50,900.

Getting Financial Help
Each year, an estimated $46 billion in grants and scholarship money is awarded by the U.S. Department of Education and the nation’s colleges and universities. In addition, about $3.3 billion in gift aid is awarded by private sources, including individuals, foundations, corporations, churches, nonprofit groups, civic societies, veteran’s groups, professional groups, service clubs, unions, chambers of commerce, associations and many other organizations.
Published tuition costs are not what many students end up paying, thanks to financial aid from these sources:

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Financial Aid
There are four main types of financial aid, Grants, Scholarships, Loans and Work-Study Programs:

Grants
Grants are called gift aid because they do not have to be paid back. Grants come from federal and state governments and from colleges. Most grants are need based, which means they are usually given based on your or a family’s financial circumstances.

Scholarships
Scholarships are also gift aid. Scholarships come from governments, colleges and private organizations. They may be awarded in case of financial need or just based on merit for academic or athletic ability, interest in a certain subject, or volunteer work, for example. Some scholarships are given based on membership in an ethnic or religious group. Companies may also give scholarships to children of employees.

Loans
Borrowed money can come from a bank, government or lending company. A loan must be paid back, almost always with an extra interest charge. The federal government offers low-interest loans to students with financial need. Other lenders charge more interest. The College Board can help you figure out how much you can afford to borrow.

Work-Study Programs
The Federal Work-Study Program offers paid part-time jobs to help students pay for part of their college cost.

The College Board’s Three Steps to Tap into Grants and Scholarships¹
To apply for grants and scholarships, you’ll most likely have to fill out financial aid forms such as the Free Application for Federal Student Aid (FAFSA) and the CSS/Financial Aid PROFILE®. Outside scholarships usually have their own application forms and application processes.

1. Complete the FAFSA (Free Application for Federal Student Aid)
You must fill out the FAFSA to qualify for federal aid. Many states and colleges use the FAFSA to award aid as well.

2. Find Out What Financial Aid Forms Your College Requires
Apply for your college’s gift aid by filling out the required forms. In many cases, this will be the FAFSA, but some colleges require the PROFILE or their own forms. Contact the college financial aid office to find out. Then submit the required forms on time.

3. Research and Apply for Outside Scholarships
Start by talking with your school counselor about how to find outside scholarships. Read Where to Find College Scholarships for more tips. And use free online searches, such as the College Board's Scholarship Search. To apply for an outside scholarship, you’ll probably have to fill out an application form, and you may also have to submit financial aid forms.

Complete the Free Application for Federal Student Aid (FAFSA) to be considered for financial aid from the federal government, state governments and many colleges. You can also apply for financial aid directly from the colleges you’re applying to and from private organizations. Some of these may require you to submit the CSS/Financial Aid PROFILE or other forms. Both the FAFSA and CSS/Financial Aid PROFILE open on Oct. 1 each year.

Oct. 1 of the year before you plan to go to college is the first day you can file the FAFSA. College, state and private financial aid deadlines vary. Aim to file the FAFSA as close to Oct. 1 as possible; remember that financial aid dollars are limited, and in many cases are awarded on a first-come, first-served basis. Read Financial Aid Can Help You Afford College to learn more.

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Ways to Qualify for a Scholarship
There are many scholarship options to choose from, each with a different criteria for qualifying for a grant. Here are some ways a student might qualify.

1. Choose a major in a Science, Technology, Engineering and Mathematics (STEM) field.
Many organizations in the United States follow the broad guidelines of the National Science Foundation on what constitutes a STEM field. The NSF definition of STEM subjects includes subjects in the fields of chemistry, computer and information technology science, engineering, geosciences, life sciences, mathematical sciences, physics and astronomy, social sciences anthropology, economics, psychology, sociology, and STEM education and learning research. Eligibility for scholarship programs such as the CSM STEM Scholars Program use the NSF definition. Students with scientific ability can showcase their creativity in online science competitions.

2. Apply to Scholarships Based on Your Major
There are scholarships available for students enrolled in a specific major, from education biology to mechanical engineering. Students pursuing a nursing degree, for example, can apply for a range of award money, such as the Church of the Brethren nursing scholarship, which offers up to $2,000 per recipient.

3. Take Advantage of Employer Scholarships
This type of scholarship has been around for some time, but can be forgotten in the era of online scholarship searches. Many companies from Taco Bell to ExxonMobil – offer scholarships to a child of an employee. And these types of programs aren't limited to the private sector. If a parent works for the federal government, the child may be eligible for the Federal Employee Education Assistance Fund, a national scholarship competition.

3. Athletic scholarships
Not all scholarships to athletes are given directly by a NCAA Division school. High school athletes can also find money to support their academics through private scholarships.

4. Use Creativity and Talent for Nontraditional Scholarships
For students who enjoy the spotlight, there are specialized scholarships for acting, dancing and music. Musicians, for example, can compete in many ways for a scholarship, sending samples of their vocal or instrumental talent to competitions. And if you're talent isn't in the performing arts, there are scholarships in other areas from visual arts to cooking.

5. Ask Your College About Institutional Scholarships
Applying early is one way to improve your odds of receiving grant aid from an institution, financial aid experts say. In fact, the largest increase in aid to undergraduates has been in institutional grants, which has jumped up by $9.6 billion in awards over the last five years – a 32 percent hike in funding, according to a 2015 report from the College Board.

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Another Way to Get a Free or Low-Cost Education
You can’t count on this but if you gain admission to one of the most elite colleges your education could be free or nearly free. To help students from low-income families, these ten well-endowed colleges offer free tuition or “full ride” (all expenses) support for low income students: Brown, Columbia, Cornell, Dartmouth, Duke, Harvard, Princeton, Stanford, and Yale. For example, the total 2018-2019 cost of attending Harvard College without financial aid is $46,340 for tuition and $67,580 for tuition, room, board, and fees combined. The Harvard College financial aid program requires no contribution from Harvard families with annual incomes below $65,000; asks from 0 to 10% of income for those with incomes up to $150,000; and expects proportionally more from families with incomes above $150,000.

Saving for College
Most students will have to pay something from their own or their family’s resources for college and that means from savings and loans.

When tuition and fees, room and board, books, supplies, other incidentals and transportation are included, the average cost of sending a child to a four-year public university is over $75,000 today. Assuming that the current high rate of increase in the cost of college continues, a child born now could face a much higher four-year bill.

Fortunately, there are special tax-advantaged investment vehicles like Roth IRAs and 529 college savings plans that can help with educational expenses. And keep in mind, the more savings that are available, the less a student will have to borrow.

529 College Savings Plan
A 529 plan, also known as Qualified Tuition Programs (QTP), offers tax-free investment growth and tax-free withdrawals when the money is used to pay for qualified higher education expenses. For information see the College Savings Plans Network website that provides links that take you to each state's 529 plan website.

Federal tax advantages
Among of the biggest advantages of 529 plans over other college savings options are the tax advantages they offer. Earnings grow tax-deferred and withdrawals are tax-free when used for qualified education expenses. 529 plans allow the account owner to maintain control over the assets in a 529 plan for the life of the account. Anyone can contribute to a 529 plan. The IRS typically allows gifts of no more than $15,000 a year (for tax year 2018) to another person without a federal gift tax, but you can contribute up to $75,000 to a 529 plan in one year. A special tax law allows you to aggregate five years of the allowable $15,000 annual gift-tax exclusion to jump-start a 529 plan but you will be precluded from making any further gifts for five years.

If you over-fund a 529 plan or your child does not go to college, and you withdraw money from a 529 plan that is not used for qualified education expenses, you are generally required to pay income tax and an additional 10-percent penalty on the plan’s earnings. The penalty may be waived if your child gets a scholarship or is disabled. And you can often transfer the account to another beneficiary if they are a "family member" of the original beneficiary. "Family members" include, among others, the beneficiary's spouse, son, daughter, grandchild, niece, nephew and first cousin.

State Tax Advantages
State tax treatment of 529 plans varies from state to state. In more than 30 states and the District of Columbia, contributions are tax deductible if you're a resident of the state sponsoring the 529 plan. In some of those states—Arizona, Kansas, Montana and Pennsylvania—you can claim a state tax deduction for any 529 plan, regardless of its location. The amounts you can deduct also vary. A few states offer scholarships, grants or matching contributions for low- and moderate-income families. Visit the College Savings Plans Network website to compare plan benefits by state. There also may be state tax implications when you transfer from one 529 plan to another, so you may want tax advice before you make a transfer.

2018 Changes
The Tax Cut and Jobs Act brought important changes to 529 plans:

Roth IRA
In a Roth IRA, the principal portion (the amount you put in) does not reduce your tax liability in the year you invest. The principal can be withdrawn tax-free and penalty-free at any time for any purpose. Earnings in the account grow tax-free and can be withdrawn tax-free and penalty-free only after you reach retirement age. A key benefit of Roth IRAs is that distributions are not taxed as earnings until the entire principal balance is withdrawn. That means you can take out as much as you put in tax-free to pay for college and withdraw the earnings portion tax-free when you turn 59 1/2.

Roth IRAs also allow you to take out funds tax- and penalty-free to pay for qualifying educational expenses after five years, (or to make a down payment on a house). However, there are income and contribution limits. Single taxpayers earning more than $129,000 per year ($191,000 for married couples) are not eligible, and you can only contribute $5,500 per year ($6,500 if you’re over age 50).

Prepaid College Tuition Plans
These plans allow you to pay for portions of your child’s college tuition now, locking in current prices — protecting you from expected tuition hikes if your child is still years away from attending college. Your child typically, but not always, will have to attend an in-state public school. More than a dozen states offer prepaid tuition plans, though some are currently closed to new enrollment. Like 529 college plans, gains in these plans are also usually exempt from federal taxes.

Coverdell Education Savings Account
Similar to 529 college plans, a Coverdell ESA is generally tax-advantaged if the money is used to pay for educational expenses. And, like a 529, it’s also considered your asset — not your child’s — so it will have less impact on your child’s chance of getting federal aid. Coverdell ESAs can be used to cover any educational expenses, including K-12 costs such as private school tuition. However, there are some limits: You can only contribute $2,000 per year per child, and eligibility starts to phase out for couples earning more than $190,000 a year ($95,000 for singles). Funds not used by the time your child is 30 may be subject to a taxes.

In 2002, the Education IRA was renamed the Coverdell Education Savings Account. These accounts work very much like a 529 plan, offering tax-free investment growth and tax-free withdrawals when the funds are spent on qualified education expenses. However, in addition to college expenses, certain K-12 purchases are also considered qualified when using a Coverdell ESA.

However, tax-free withdrawals from 529 plans are limited to $10,000 in tuition expenses for K-12 schools, but when using a Coverdell ESA, qualified elementary and secondary education expenses also include books, supplies, equipment, academic tutoring and special needs services in connection with enrollment or attendance at an eligible school.

UGMA and UTMA Custodial Accounts
These types of accounts, where financial gifts to a minor are held in a custodial account until the child reaches adulthood, offer another option for saving for your child’s education. Unlike the other saving options, these types of accounts can also be considered your child’s asset, not yours — which means they can affect the amount of federal aid your child qualifies for when filling out the Free Application for Federal Student Aid (FAFSA). The money belongs to your child, so at age 18 or 21, he or she can use it to pay for college or for something else entirely.

U.S. Series EE and I Savings Bonds
Backed by the full faith and credit of the United States government, U.S. government savings bonds offer a tax-advantaged way to save for college. The interest from these bonds is usually exempt from state and local taxes and is tax free if used for qualified higher education expenses.

Gift of College
This program allows other family members and friends to give a gift directly to your 529 college savings plan. It’s free for you to register, but there is a 5% processing fee (up to $15 per transaction) when you receive a gift. You create a profile for your child, and your family and friends can give a gift that way. Instead of giving toys or clothes for birthdays, holidays, or other occasions, ask loved ones to make a gift this way, as it can make a more lasting impact on a child’s life.

The American Opportunity Tax Credit and Lifetime Learning Credit offer two ways to reduce your taxes while paying for college:

1. American Opportunity Credit
This is a tax credit of up to $2,500 of the cost of tuition. A tax credit reduces the amount of income tax you may have to pay. It is available for four years of college and can be used for course materials, in addition to tuition and fees. Forty percent of the American Opportunity Credit may be refundable. This means that if the refundable portion of your credit is more than your tax, the excess will be refunded to you. To qualify for the American Opportunity Credit, your child must be pursuing a degree, going to school at least half time and not have a felony drug conviction. Income limits apply: see the IRS American Opportunity Tax Credit information for details.

2. Lifetime Learning Credit
With the Lifetime Learning Credit, you can claim up to 20 percent of the first $10,000 paid for college tuition and fees, for a maximum credit of $2,000 per tax return. Unlike the American Opportunity Tax Credit, there is no limit on the number of years you can claim the Lifetime Learning Credit. It may be used for under-graduate and graduate courses and even for tuition and fees when your child is attending school less than half time.

You can only claim the credit once per tax return, no matter how many children you have enrolled in college at the same time. Income limits apply: see the IRS Lifetime Income Credit information for details. If you qualify for an American Opportunity Credit or Lifetime Learning Credit, you can still claim the credit even if you make a withdrawal from a 529 plan or Coverdell Education Savings Account (ESA). You just can’t apply the credits based on qualified expenses paid with 529 or ESA money. If you are eligible to claim the lifetime learning credit and you are also eligible to claim the American Opportunity Credit for the same student in the same year, you can choose to claim either credit, but not both. Income limits apply. See IRS Publication 970: Tax Benefits for Education.

Know the Cost of College Loans
The news is replete with stories about massive college (and graduate school) debts that under-employed graduates are struggling to pay down. Forbes reports that student loan debt in 2019 is the highest ever. There are more than 44 million borrowers who collectively owe $1.5 trillion in student loan debt in the U.S. alone––nearly $5,000 for every person living in the U.S. Student loan debt is now the second highest consumer debt category––behind only mortgage debt––and higher than both credit cards and auto loans. Borrowers in the Class of 2017, on average, owe $28,650, according to the Institute for College Access and Success.^³ More than $100 billion of this debt is in default.

This suggests that loans should be the last resort for paying for college. Even so, for many students and their families, loans are the only way to pay for a college education. Keep in mind that loans must be paid back with interest, or paid back before interest begins to accrue.

There are two broad categories of student loans—federal student loans, which are administered by the U.S. Department of Education, and private student loans, which are non-government loans issued by non-governmental lenders, including banks, credit unions and companies such as Sallie Mae.

While federal student loans have strict eligibility requirements and borrowing limits, they traditionally offer several advantages over private loans. For example, federal student loans charge a fixed rate of interest, and payments on principal typically are deferred until six months after the student graduates. Interest on federal student loans begins to accrue when the proceeds of the loan are disbursed to the school—but students who demonstrate financial need may be eligible for a subsidized federal student loan, meaning the government covers (or subsidizes) the interest as it accrues until the deferral period ends and you start repaying the loan. With unsubsidized federal student loans, borrowers can choose to pay the interest as it accrues or allow it to “capitalize.” In other words, the interest rolls into the principal balance, compounding your overall debt. Capitalization can be costly in the long run because, when you begin repaying the loan, you start out with a higher principal balance—and so you wind up paying more in interest over the life of the loan.

In contrast to federal student loans, private student loans usually charge variable interest rates that are often higher than those available for federal loans. In addition, origination and disbursement fees can be high, interest accrues (and is often capitalized) during the student years and repayment options tend to be more limited and less flexible. For example, you might not be able to defer payment on a private loan if you decide to go to graduate school.

Regardless of income, parents and students should research—and exhaust—federal student loan options before turning to private loans. Not all federal student loans are based on demonstrated financial need. Ultimately, if you apply for a federal student loan, you will need to complete a FAFSA form.

A Final Word of Advice
Take your time and study the many options that are available to make paying for a college education affordable. Recently it has become fashionable to question the wisdom of an investment in a college education––after all, Bill Gates and Steve Jobs were college dropouts. But for most of us, the social and financial benefits of college far outweigh the cost. The lifetime earnings gap between high school and college graduates is substantial. A recent study from Georgetown University found that, on average, college graduates earn $1 million more in earnings over their lifetime. Another recent study by the Pew Research Center found that the median yearly income gap between high school and college graduates is around $17,500.

Glossary of College Savings Terms⁴

A tax-advantaged investment program designed to help finance education expenses. There are two types of 529 plans: prepaid tuition plans and college savings plans. Every state offers at least one of these. Tax advantages, investment options, restrictions and fees can vary a great deal from one plan to another.

Administration/Management Fee (Expense Ratio)
Total annual college savings plan operating expenses, expressed as a percentage of the plan’s assets. An expense ratio of 1 percent represents an annual charge to the fund’s net assets—including your proportional interest in those assets—of 1 percent every year.

Age-Based Fund Portfolios
College savings plan portfolios that change their asset allocation according to the beneficiary’s age. Initially age-based portfolios invest primarily in stock funds. As the beneficiary grows older, the stock funds are replaced by more conservative investments such as bond funds.

American Opportunity Tax Credit
An educational tax credit designed to reduce education costs. This is an expanded version of the Hope Credit, available for four years of college and can be used for course materials, in addition to tuition and fees.

Annual Maintenance Fee
Total annual college savings plan upkeep expense. An annual charge of $10–$25 is a typical maintenance fee.

Annual Operating Expenses
The sum of all of a fund’s annual expenses, expressed as a percentage of the plan’s assets.

Annual Rate of Return
The rate of return on your investment, expressed as a percentage of the total amount invested.

Annual Report (Form 10-K)
Public companies are required to file an annual report with the Securities and Exchange Commission (SEC) detailing the preceding year's financial results and plans for the upcoming year. Its regulatory version is called "Form 10-K." The report contains financial information concerning a company's assets, liabilities, earnings, profits and other year-end statistics. The annual report is also the most widely read shareholder communication. Form 10-Ks are available without charge on the SEC’s EDGAR website.

Asset Allocation
A strategy for maximizing gains while minimizing risks in your investment portfolio. Asset allocation involves dividing your assets on a percentage basis among different broad categories of investments, including stocks, bonds and cash.

Beneficiary
The individual who receives, or may become eligible to receive, the benefits of a college savings plan.

Bond Funds
Mutual funds that invests in bonds. Some bond funds may focus primarily on short-term, intermediate-term and long-term maturities. Also known as fixed-investment funds.

College Savings Plans
This type of 529 plan allows you to invest in various mutual fund portfolios or other investments on a tax-deferred bases, and to pay college or graduate school expenses with tax-free withdrawals. Many states now offer at least one college savings plan that has no residency restrictions.

Compounding
The process through which the value of an investment increases exponentially over time as interest or dividends are reinvested, so that additional interest or dividends are always paid based on the value of the initial investment plus the accumulated interest or dividends already received.

Contingent Deferred Sales Charge (CDSC)
A common type of deferred sales charge. The CDSC normally declines each year and is eliminated after a number of years.

Coverdell Education Savings Accounts (ESAs)
College savings plan in which contributions grow on a tax-deferred basis and withdrawals are tax-free if used to pay for a broad range of educational expenses, including private high school tuition. Unlike 529 plans, ESAs have annual contribution limits and income restrictions.

Custodial Accounts
Uniform Gift to Minors Act (UGMA) or Uniform Transfer to Minors Act (UTMA) accounts, created for the benefit of a child. An adult controls the funds until the child reaches the age of majority, at which point the account transfers into the child’s name.

Custodian
The adult who has control over a custodial account.

Enrollment Fee
A fee assessed when you enroll in a college savings plan. Enrollment fees are typically between $10 – $90, although some college savings plans offer free enrollment.

Exchange-Traded Fund (ETF)
A type of pooled investment. ETFs are baskets of securities that track a particular market index, such as the Standard and Poor's 500 Index.

Fixed-Income Funds
See Bond Funds.

Gift Tax
A tax assessed against a person who gives money or assets to another person without receiving fair compensation.

Hope Credit
An education tax credit designed to reduce education costs. Renamed the American Opportunity Tax Credit.

Lifetime Learning Credit
An education tax credit designed to reduce the costs of college education. It can only be claimed once per tax return regardless of the number of children you have enrolled in college at the same time.

Modified Adjusted Gross Income
Your annual adjusted gross income without taking into account any IRA deduction, student loan interest deduction, or certain other deductions as specified under the Internal Revenue Code.

Mutual Funds
Types of investment funds that raise money from shareholders to invest in a group of assets such as stocks, bonds, and money market funds. Mutual Funds often have a minimum investment amount and a series of fees associated with them.

Non-Age Based Investment Options
Any college savings plan portfolio that doesn’t shift asset allocation according to the age of the beneficiary.

Non-Qualified Withdrawals
Withdrawals from a college savings account that are used for non-college related expenses. Non-qualified withdrawals of earnings from 529 plans are subject to income tax and an additional 10-percent penalty on earnings.

Pre-Paid Tuition Plans
This type of 529 plan allows parents, grandparents, and others to lock in today’s tuition rates for a future student beneficiary at any of a state’s eligible public colleges or universities, avoiding future tuition increases. There are usually residency requirements and no investment options.

Prospectus
Every mutual fund has a prospectus that provides information about the fund, as required by securities regulators. You can get a prospectus from the fund company (via website, phone or mail) or your financial adviser. Mutual fund prospectuses are available without charge on the SEC’s EDGAR website.

Qualified Education Expenses
Approved expenses for college savings plans. All withdrawals from a college savings account that are used to pay qualified expenses are tax-free. These expenses include: tuition, fees, books and supplies, equipment, and room and board.

Qualified Withdrawals
Any withdrawals from a college savings account that are used at eligible schools for college-related expenses. These withdrawals are tax-free and cover expenses such as tuition, room and board, book and supplies, and other equipment intended for college use.

Quarterly Report (Form 10-Q)
A report that the SEC requires publicly held companies to file quarterly, that provides unaudited financial information and other selected material. Form 10-Qs are available without charge on the SEC’s EDGAR website.

Registration Statement
A set of documents, including a prospectus, which must be filed with the Securities and Exchange Commission before a firm can release its initial public offering and begin trading.

Sales Charge (Front-End Load)
The fee charged when you purchase mutual fund shares. For example, suppose you want to spend $10,000 to purchase mutual fund shares, and the mutual fund imposes a front-end sales charge of 5 percent. You will be charged $500, and you will receive shares with a market value of $9,500. A mutual fund may offer you a discount if you:

You should ask your financial adviser whether these discounts or breakpoints are available to you. Not all mutual funds have a sales charge or load. Many mutual funds, called no-load funds, have no sales charge or load. You can find the sales charge in the fee table in the front of a fund's prospectus.

Stock Funds
Mutual funds that invest mainly in stocks. Some stock funds may focus primarily on smaller, mid-sized or larger corporations, or on specific market sectors. Also known as equity funds.

Tax Deductible
An expense that can be deducted from annually reported income to reduce the amount of tax payments to the government.

Tax-Deferred
Taxes that can be paid at a future date, typically when shares of certain investments are sold. Tax-deferred mutual funds can increase interest payments because more money is compounded in the fund.

Underlying Fund Expenses
Expenses or fees charged by an investment firm for managing funds for college savings plans. These fees come in addition to any administrative or management fees that a state government charges for running a college savings plan.

Uniform Gift to Minors Act (UGMA)
A tax-advantaged custodial account for college savings. An adult acts as the custodian for the account and makes all the investment decisions until the beneficiary reaches the age of majority. At that point the beneficiary controls the account and any assets in the account. UGMA accounts are limited to holding money and securities.

Uniform Transfer to Minors Act (UTMA)
A tax-advantaged custodial account for college savings. An adult acts as the custodian for the account and makes all the investment decisions until the beneficiary reaches the age of majority. These accounts are very similar to UGMA accounts, but in addition to money and securities, UTMA accounts can also hold real estate, fine art, and patents and royalties.

U.S. Series EE and I Savings Bonds
Backed by the full faith and credit of the United States government, U.S. government savings bonds offer a tax-advantaged way to save for college. The interest from these bonds is usually exempt from state and local taxes and is tax free if used for qualified higher education expenses.

³ https://www.forbes.com/sites/zackfriedman/2019/02/25/student-loan-debt-statistics-2019/#142e0964133f

⁴ Financial Industry Regulatory Authority http://www.finra.org/investors/glossary-college-savings-terms

Grants Grants are called gift aid because they do not have to be paid back. Grants come from federal and state governments and from colleges. Most grants are need based, which means they are usually given based on your or a family’s financial circumstances.

Work-Study Programs The Federal Work-Study Program offers paid part-time jobs to help students pay for part of their college cost.

Back to top Ways to Qualify for a Scholarship There are many scholarship options to choose from, each with a different criteria for qualifying for a grant. Here are some ways a student might qualify.

Glossary of College Savings Terms4

Grants
Grants are called gift aid because they do not have to be paid back. Grants come from federal and state governments and from colleges. Most grants are need based, which means they are usually given based on your or a family’s financial circumstances.

Work-Study Programs
The Federal Work-Study Program offers paid part-time jobs to help students pay for part of their college cost.

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Ways to Qualify for a Scholarship
There are many scholarship options to choose from, each with a different criteria for qualifying for a grant. Here are some ways a student might qualify.

Glossary of College Savings Terms⁴