Norway Savings Bank - more than money

 

High school students looking forward to freshman year '06 have just a few months left to get finance-familiar before they have to make important decisions about funding their educations. Instead of being blindsided by the reality of paying for college, here's what high school seniors (and their families) can do to prepare for the best—albeit most expensive—years of their lives.

Get involved. Learn the specifics about different types of financial aid. Talk with your guidance counselor and use the Internet to research information at www.collegeanswer.com and the U.S. Department of Education's financial aid resource for students (www.ed.gov/offices/OSFAP/Students).

Start saving. If you have a job, put your earnings into a college fund. If you don't have a job, save money from any gifts or allowances. Talk to your parents about putting this money into an interest-bearing account that you'll only access for college costs.

Start a college fund. If you haven't already, open an account in which you'll save for college expenses, and put away a certain amount each week or month. Consult a financial adviser about investing in common stock, mutual funds, or opening an Education IRA, which is specifically for college savings and may give you a bigger return on your investment than a regular savings account. Refer to financial magazines for the toll-free numbers or web addresses of mutual fund companies.

Consider a 529. All states created college savings programs that make saving for higher education easier. In 2001, qualified state tuition plans (or 529 plans) gained federal tax exemption status. Some states may offer additional tax benefits, such as allowing contributions to a 529 account regardless of the student's age or grade level. Visit www.collegesavings.org for more information.

Review employment benefits. Talk with your employer about taking advantage of a 401(K) savings plan or any scholarship or low-interest loan programs for children of employees. Fortunately, accumulated funds in 401(K) plans are not counted in determining how much your family is expected to contribute toward college costs. You can also make early withdrawals from your traditional or Roth IRA for your child's higher education expenses and not have to pay the penalty associated with other early withdrawals.

Learn about tax benefits. Several education-related tax benefits are available for families under the Taxpayer Relief Act of 1997. For more information on the Hope Scholarship Credit and Lifetime Learning Credit for tuition and expenses, contact the IRS at 800-829-3676 or visit www.irs.gov for a copy of IRS Publication 970, "Tax Benefits for Higher Education." You may also visit the Managing Your Money section at www.nelliemae.com for an overview of tax considerations.

It's important that families communicate about financial expectations when it comes to paying for higher education. Often, despite the most conscientious planning, savings and investment account balances simply won't cover a student's cost of attendance. Education loans from Nellie Mae are affordable ways for students and their parents to pay tuition. Visit www.nelliemae.com to get more information about student loans, preparing for college, and borrowing wisely.