Benefits with SISC - Self Insured Schools of California-

Paying for Higher Education

There are several different ways to save specifically for your child's educational expenses. These savings vehicles have benefits that other savings accounts will not have, as long as the funds and earnings are only used for educational expenses.

529 College Savings Plan

A 529 College Savings Plan is offered by your state but will have federal and possibly state tax benefits. Each state will decide if it will offer a 529 plan and what that plan will entail. You would elect a beneficiary for the account, who would be the individual who will be attending college. You could even set one up for yourself. These accounts are similar to a 401(k) or IRA, since the funds you contribute to a 529 plan will be invested in mutual funds or other investment options. You will choose what options you want your funds to be invested in. The account's value will fluctuate based on the performance of that investment option. The withdrawals that will be made need to be for qualified expenses, which will typically be education-related. If the funds are used for unqualified expenses, you could get hit with a penalty and tax on that withdrawal.

Benefits of the 529 College Savings Plan

• Federal tax benefits exist for these type of accounts. You cannot deduct your contributions to the account, but you can withdraw the earnings free of federal taxes.
• Possible state tax benefits exist for these types of accounts. Each state will have its own benefits, so be sure to research what they might be for your state.
• The donor of the account remains in control of how the funds are spent. The beneficiary doesn't have access to the money.
• The plans are relatively easy to set up and require little maintenance.
• If you want to change your investment options in the account, you can typically do so every year. This makes for a flexible plan. You will want to check with your state to see if it limits the number of changes you can make.
• These plans allow for substantial deposits. Some states allow around $300,000 or more.
• Anyone can contribute to the plan. A common contributor might be a grandparent.

There can be some disadvantages to these plans. The most common are that there are no limits on tuition rates, if the plans are not used for educational expenses you get charged with taxes and a 10% penalty, and investment options are typically limited.

529 Prepaid Tuition Plan

A 529 Prepaid Tuition Plan plan allows you to prepay all or part of the costs of an in-state public college education. The funds can also possibly be converted for use at a private or out-of-state college as well, but they may not transfer at the same value. Educational institutions can also offer their own prepaid tuition plans. Check with your state and the institution to discover more about their prepaid tuition plans.

Remember that these are not investment accounts. You can decide to withdraw the money, and if you do, you will sometimes be paid interest as well, but it won't be much. Be sure to do your homework on the plan you are thinking about purchasing. Some of these plans have seen some hardships in recent years and have even been shut down.

Coverdell Education Savings Account (ESA)

A Coverdell Education Savings Account (ESA) is similar to a 529 plan but does have some differences. It is another savings vehicle that is set up to pay the qualified education expenses of a designated beneficiary. This kind of account used to be called an educational IRA. One of the major differences between an ESA and a 529 plan is that expenses for kindergarten through 12^th grade will be considered qualified educational expenses. There is also a contribution limit of up to $2,000 a year for these plans, and after the beneficiary has turned 18 no more contributions can be made. The funds can stay in the account until the beneficiary is 30 years old. If the money has not been used for qualifying expenses at that point, then there will be an automatic withdrawal, and that money will be taxed. The value of this kind of account will vary based off of the performance of that investment option.

Advanced Placement Courses

Another way to get some help with the cost of college is to take advantage of any Advanced Placement (AP) classes that might be offered at your child's high school. These classes have been created by the College Board and offer college-level curricula and exams. If a student obtains high enough scores on these exams, they can sometimes count as course credits at the college level, which will save you money on tuition costs.

Tuition Reimbursement

Does your current employer offer some type of tuition reimbursement? If it does and you plan on attending school while working there, try to take advantage of this opportunity. You may need to have worked at that company for a certain amount of time before you are eligible, and it's possible that you could have to continue working at the company after you graduate or be required to repay the tuition costs.

Getting a Job or Internship

Consider picking up a part-time job while in school. This can really add up in savings over the course of your college career. You can also look for a paid internship that offers course credit as well. This may be difficult in today's economy, but talk with your college counselors to see if there are any options available.