Saving for college is something that has been overlooked in recent years. College debt is on the rise with more and more college graduates owing thousands of dollars in student loans. You might be able to avoid this debt by exploring strategies that can help you save for college more effectively. However, if bankruptcy is a concern, then consider reaching out to a Chattanooga bankruptcy attorney for help.
How to Build a College Fund
Building a college fund does not have to be as difficult as it sounds. There are several types of college savings accounts that can help you grow money for college. These include 529 accounts, prepaid tuition plans, custodial accounts, savings bonds, and Coverdell accounts. Each type comes with different costs and benefits.
A 529 account is one of the most popular ways to save for college. Money in this account will grow without having to worry about tax fees. This means money can grow in this account much faster. Prepaid tuition plans allow family members to pay a stable tuition cost before their child attends college. That way, you are not stuck dealing with tuition costs that increase each year.
Custodial accounts also have a tax advantage. Instead of going by the parent tax rate, this account goes by the child’s tax rate. You can also use money from this account for anything, even non-college expenses. Savings bonds are tax-free ways to build money, but they may take decades to build value. Coverdell accounts also grow tax-free but is limited to a $2,000 contribution per year.
Comparing costs and benefits can help when choosing a college savings plan for you. College savings plan benefits include coverage for all educational expenses, no age limits, no residency requirements, and open enrollments. The risks of college savings plans are higher because they are not guaranteed by the state like prepaid tuition plans are. However, prepaid tuition plans have age, time, and residency limits.
Saving for College on Your Own
You also always have the option to save for college on your own. Calculating the total costs of the college you plan to attend is the first step. Tuition is important, but do not forget about housing, food, gas, college materials, and other expenses. Follow college savings tips to manage your college savings plan.
One way to save for college is to create a weekly savings goal. You can do this manually or set up automatic weekly deposits into a savings account. Explore budgeting tools and apps to set a budget for yourself to maintain this savings goal.
Going through this budgeting and savings process will not only help you save for college but will also help you develop vital budgeting skills. This can lead to long-term financial gains.
Call Tom Bible Law for Legal Help
Do not panic if you find yourself trapped in college debt. You have options for escaping debt. Start by contacting us at Tom Bible Law by dialing (423) 424-3116 for a consultation today. Our dedicated team of Tennessee bankruptcy lawyers can help you navigate the complex process of filing for bankruptcy. We are located throughout the Tennessee cities of Chattanooga, Kingsport, and Tullahoma.