Congress recently added new advantages to the popular 529 investment plan for college savings. The savings vehicle can now accumulate interest and be drawn tax free. This is a great advantage to parents who are saving for the children's college expenses because they will not have to pay taxes on the account as it grows. Another benefit? A child can still qualify for financial aid (grants, scholarships, etc) because it is not included in their total assets. All students must submit a FAFSA that lists their assets and, in most cases as dependents, their parents assets to determine what kind of financial aid they qualify for. Once again, the 529 comes out ahead as the ideal college fund.
If you don't already know what a 529 is, you should definitely read up on them.
Why save for your children's college? I find it incredulous that some parents do not believe in saving for their kids college education. College is no longer optional, and the cost continues to rise. It is absolutely impossible for a student to work their way through college anymore. As is the case now, and will be more so in the future, the basic tuition will be more than any part-time high school graduate could possibly make.
That leaves 3 options: Scholarships, grants, and loans.
Scholarships are the ideal solution to paying for college, but here's the rub. Not all kids are going to qualify, and just because you can't get a scholarship doesn't mean you won't do well in college.
Grants are great for low income families and they can sometimes pay a very large portion of tuition. I myself used grants during college.
Loans are the worst possible way to finance college, yet everyone seems to take them for granted. You not only pay far more for your education over the long term, but you put a young adult fresh into the business world already in a mountain of debt. Graduate students, borrowing money all through college, will likely have a monthly loan payment higher than their parent's mortgage. Face it, college isn't a guarantee at a job, and everyone starts at the bottom. Despite recent polls of students whose expectations are far too high, most college grads won't be making six figures out the door. Yet that $1,000 a month loan payment is still going to be coming in the mail whether your kid is making $30,000 a year or $100,000.
If you are ready to start, you can open up a 529 online at sites such as Vanguard.com.