Archive for the ‘College’ Category

A Primer on 529 Plans – your Best Shot Saving for your Child’s College

Posted on Dec 7, 2010 02:43:06 PM

We are friends with this young family that lives close by; they have three little daughters, all under 8, and it’s a family that anyone would want to model theirs on. To me, the most remarkable thing about them is not just that they are perfect; it is how they are perfect right down to their sense of financial responsibility. Their daughters are young and they don’t need to start worrying yet about being ready with a fat endowment when they decide to get married or anything; but the time that they will need to pick a college is maybe only 10 years away, and it’s already making them nervous. For about 6 years now, they have been socking away $500 a month in 529 plans for college (it’s been built up to $30,000 already). They had the foresight to look up college costs perhaps three weeks after their first daughter was born, and they right away got around to it without putting it off.

There is no other savings channel that could possibly give them all that 529 plans do. They lock in their college costs at today’s prices, their money grows – and everything is tax free. They won’t be able to cover all the costs of their kids’ education by the time they grow up; but they have the right idea, and they’re doing the best they can. 529 plans certainly seem to attract a great deal of fierce loyalty from families with young children. According to the Financial Research Corporation of Boston, 529 savings plans are going to attract about $250 billion of investments by next year. And that is up from practically nothing just 10 years ago.

Here’s a quick rundown of what makes a 529 plan what it is. To begin with the curious name, as you would expect it, comes from the section of the tax code that sanctions the plan. These plans come in two flavors: college savings plans and prepaid tuition plans. Depending on the state, you’ll get an option in one or the other, and sometimes you’ll get both. Prepaid tuition plans are the ones that will allow you to lock in your college costs at today’s prices. For instance, if you live in Florida and have a child who will need to be in college in five years, the belief is that a four year degree at a University of Florida college will cost about $48,000 then. With your prepaid 529 plans now though, you could freeze it at today’s prices, which would be $35,740.

If you go with state-sponsored prepaid 529 plans, they ask that you sign up right away to one of several major established state institutions. If you pick an independent 529 plan, you get your pick of several smaller independent colleges. Prepaid plans can be somewhat bothersome. Most states don’t offer them, and when they do, they require that you be a citizen of that state to be eligible to apply. And they can be expensive too – not entirely suitable for people who want to save slowly, or just a part of what is needed. The most popular 529 option lies in the savings plans. These let you begin to save for admission to colleges in every state of the country today. And they are pretty easy to set up too. The great thing about these plans is, that it’s completely up to you when you make your deposits and how you choose to see your money invested.

If you worry that sort of thing, with a 529, your child gets no say over how to spend the proceed when it finally comes due. When they have no legal funds to their name, they become eligible for financial aid. And also, in some cases, the fact that the child has no right over how the money is spent keeps me safe from careless choices (say, spending the money on a week at the Bahamas). 529 plans can be real winners in other ways too. Over the years, you can make deposits that amount to as much as a quarter million dollars; in states like Colorado, the state will contribute up to $500 each month to your account, and you get all kinds of tax breaks as well.

Of course 529 plans can be a bit of a pain for the number of choices they give you with all kinds of features (like how they will invest your money). And if you happen to use the money to not pay for college costs, there’ll be a penalty. The way they invest your money can often become an area of serious disagreement. For instance two years ago when the markets plunged, ahead of the recession, some 529 plans tried to follow their normal plan oblivious of the economic environment. For accounts that were nearing maturity, they tried as usual to shift investments from low-risk mutual funds to more conservative investments (like income securities). In doing this, they went and sold their mutual funds on the market when it was very low. Everyone tried to stop them, but they wouldn’t listen. They sold at the bottom of the market.

529 plans, like anything else you trust others with, depend on how bureaucratic their administrators can be. Even if you’re completely enthusiastic about investing in your child’s future in this way, you need to be aware that if you are hoping for Hope and Lifetime Learning tax credits, paying your child’s entire college education bills with a 529 bounty can disqualify you. Well, nothing is without the downside.

College Entrance Essay

Posted on Oct 12, 2010 03:50:19 AM

College application counselors often have some very sound advice to give potential college applicants on how to make the application process go smoothly. The college entrance essay in particular, since it happens to carry disproportionately high influence for the outcome of the process, needs some of the best guidance measures they have. Among application counselors, it is common knowledge that a hopeful student can’t just work on the one essay and hope it will get him or her through.

The college entrance essay process is actually supposed to start perhaps six months before the actual event. We’ve 24 weeks to go, counselors advice there charges to gain for a new sample college entrance essay each week. They are to take up the subject of their choice and put everything they have to do it each week. Why you ask? It’s to get them used to the process of putting their thoughts to paper.

Each week, the counselor takes of each essay and critiques it. With the lessons learned, the student can hopefully put something better together the next time around. The college entrance essay typically belongs to one of two categories – the one where you’re supposed to show the college why you feel they would be a good fit for you; and the other where you show them why you believe you might be a good fit for them. Usually, the common application will ask you to write about a life-changing event that pushed you to deeply consider where you stood on a particular issue – a dilemma if you will. Most students what they come up against this has nothing better to say than perhaps how the movie The Matrix really made life seem so surreal. What do you look for it though was something that will set you apart – tell them you have something new in your character that’s struggling to burst free. If you hitchhiked your way across Europe, that might qualify; but if you did that and then stayed with the group of Romanic gypsies in Prague to better witness the evolution of folk dances, that would really qualify.

So you know now what direction to take with your college entrance essay. But the best ideas can lose the plot with poor technical skills in writing. The actual writing process is meant to put the reader directly in contact with the experience to detail. If the reader in the end doesn’t really know the situation you describe as well as you do, the writing is good enough. So from this rule follows the admonition that every word you pick needs to be there for a reason – clarity. While big words may be really attractive at first glance, they were going to really pull their weight once the admissions officer actually first read again to understand what they say. They do have experience to tell which words the high school senior is supposed to know. And being short, concise and incisive Bracey big points.

Some people try to go the other way with the big words – they get so informal that they can use street slang; this is almost certain to put the admissions officer off; to make sure that you use on his everyday language, make sure that it is fit for print. Everything you say in a college entrance essay as far as possible sounds best when done in active voice. The active voice instantly sounds more believable, and more pleasing. And on the subject of using and essay writing service – if all you plan to do with such a service is to obtain a good critique, that just might be worth a try. But for the most part, any admissions officer can easily tell a professionally written resume from one produced by a 17-year-old high schooler. Rolling out the heavy artillery really isn’t going to win anyway the marks.