A client came in this summer and told me her son was entering college. Because her son was 18, he could access the money in his custodial account, and she wanted to know how to discuss it with him. Keep in mind each state has different age limits on custodial accounts that range from 18 to 21. There are essentially three scenarios that can play out.

A popular but unfortunate option is not telling your children about the money. This is denial. If you set a precedent of not talking about financial matters now, your children will have little hope for financial literacy in the future. A less common approach is to turn over the accounts wholesale. This is setting your children up for failure. Instead we need a reasonable plan.

I suggest making it a family affair. It is their money, but they need assistance and probably should keep the checkbooks with you for safekeeping at first (read: until graduation!). Sit down with your children and show them the monthly statements, explaining how you built up the accounts over the years so you could assist them in starting their adult lives.

College can represent a dry run for both parties: parents are learning how to pass on wealth to their children who are learning how to leverage that legacy. College tuition is usually the first step. Have your children write the checks to the college treasurer. The first day of classes will take on new meaning when they think of how much money they are spending to be there. Also, have them set up their own checking accounts. Help them develop a budget for living expenses and write one check from their custodial accounts to their checking accounts. I know, they will probably overspend and come to you for more money. This is a golden opportunity to teach them about living within one’s means. We learn from our mistakes, so let your children make some on their own. Better now than later.

The point is that both parents and children are learning something here. If you can talk to your children about their custodial accounts, you will be able to talk about passing on your legacy later in life. Transferring wealth in the future will be easier if you have imparted your financial values and are confident about your children’s money management skills. Think of it as training wheels for an inheritance later in life: teach your children to do a good job and their training wheels eventually come off. Do a bad job and your legacy may end up in a generation skipping trust!

Or is your growing college fund killing your financial aid?

The more you save for college, the less chance you have at financial aid. This irony has created the urban legend that you will be better off if you don’t save and rack up debt, so the government will pay for your child’s education. As a responsible parent, or a loving grandparent, you want to save for the education of your future collegian – but you don’t want those savings to jeopardize any chance your child has at the best financial aid.

How can you avoid or reduce the effects of this paradox?

When you save for college, hold your assets in a manner that will have the least affect on your future Expected Family Contribution, or EFC. Financial aid is determined by first calculating the EFC – how much of student and parental assets and income are expected to be used for college expenses each year. Parents and students complete a FAFSA form (Free Application for Federal Student Aid) to provide their income and asset information to schools. The schools use the EFC calculation derived from the FAFSA to offer aid packages of grants and/or loans to fund the difference between the EPC and the total cost of tuition, room & board.

What is the expected contribution from student and parental income?

Income calculated after allowances*:
Student Income 50%
Parental Income 22-47% (based on income level)

*Allowances include: federal and state taxes, social security contributions, “income protection” ($19K for family of four), and “employment expenses” ($3100, typically)

Student Income includes:
Income from employment, business, contracting May include withdrawals from 529 Plan, if owned by someone other than the parent (such as the grandparent) Income from a trust or partnership (in some cases)

Parental Income includes:
Income from employment, business, contracting Income from non-retirement assets (real estate, stocks, mutual funds, bonds, cash) Withdrawals from IRAs and/or other retirement accounts May include annuity distributions

Not included:
Withdrawals from 529 Plan owned by parents Withdrawals from Educational IRAs

Income may change for year to year depending upon how the EFC was funded the year before. For instance, if the parents withdrew $10K from their IRA to pay for tuition, that withdrawal, while without tax penalty, is included in the income of the parents, and raises the EFC for the following year. However, $10K withdrawn from a 529 Plan is not included in the parent’s income and does not affect the EFC.

What is the expected contribution from student and parental assets?

Student Assets 35% (drops to 20% for 2007-2008 school year)
Parent Assets 2.6-5.64%

Student Assets:
Accounts & assets owned by the student, directly Custodial accounts UGMA/UTMA accounts Trust accounts Coverdell ESA / Education IRAs (may be changing) Savings Bonds in the student’s name

Parental Assets:
Taxable accounts & investments (non-retirement) 529 Plans (owners) 529 Plans inside a UGMA/UTMA for the child (as of 7/1/2006) Savings Bonds Investment real estate

Not Included:
Retirement Accounts (e.g., IRA, Roth IRA, 401(k), 403(b), pension) Equity in primary residence Life insurance Annuities Withdrawals from 529 Plans and Education IRAs 529 Plan if owner is not parent or student (e.g., grandparent)

Obviously, the most advantageous position is for assets to not be included in the calculation. Otherwise, you would want hold assets as parental assets, instead of student assets, to reduce the EFC.

What are other considerations?

Some schools perform their own calculations, and may include other assets, such as equity in the primary residence. Gift, estate, and generational-skipping tax considerations – for example, grandparents may need to transfer assets to the parents or student to reduce the grandparent’s future estate. Parents and grandparents may want to maintain control over assets by retaining ownership, or placing restrictions on the assets (such as through a trust). Accounts directly in the child’s name, custodial accounts, UGMA/UTMA, and some trust accounts, become under the child’s control at their age of majority (in California, at age 18). Parents should be wary of reducing their retirement savings to fund college. Various types of accounts have tax benefits, or penalties, for withdrawal to fund higher education expenses. Accounts have differing returns, risk, and fees, which may greatly affect their ability to fully fund college expenses. Funds inside a 529 Plan are subject to penalty and income tax if withdrawn for non-educational uses, with some exceptions. Multiple funding strategies may be used to take advantage of the varying options and benefits: for example, a 529 Plan to fund the first few years of college and an IRA to fund the final year.

Have you noticed that some people have all of the opportunities? They can get all of the different college scholarships? They are the people who have the best grades, because they do not need to work. It is hard when you have to work, and study just to get through high school. It makes getting the best grades difficult. It also makes being awarded with college scholarships almost impossible. Now you have an opportunity – College Scholarships For Minority Students

It does not matter if you are native American, Hispanic, African American, Asian or a woman, you have the opportunity to get a college scholarship as a minority group. You have the opportunity to get the college education that you deserve.

Some people are very lucky because they can afford a college education. They have the best grades and have a college fund that has been set up for them, since they were young. Some families do not have that option. That should not stop you from being able to attend college. That is why there are scholarships and grants for minority students have been started. They are there to give you the opportunity to get the college education that you deserve.

A good place to go to get all of the information on different scholarship opportunities is scholarship websites. You will find all of the information that you need so that you can get a college scholarship. By getting all the the information you need you are starting the process to get the college scholarships that you need, and that you deserve.

For many different people who will not go to college due to the cost of attending college it is gratifying to know there are different kinds of scholarships for students of minority groups. You don’t have to compete with the best students. Taking the first step to get the information is the first step in changing your life.

Going to college is a right for everyone. It does not matter who you are. Finding the money to pay for college is something that you can easily do. You just need to know where to look. With college scholarships for minority students, you can get the additional money you need to make your dreams of attending college become your reality. The time is now to change your life. The time is now to get the college scholarship that will give you the keys to your future. Louis Zhang, Collegescholarshipadvice dot com

Financially Challenged? There’s lots of free college information available online, and here are some of the most popular questions when it comes to student Financial Aid. Learn about the difference between grants, student loans and college scholarships and bank on your future!

What is Financial Aid? Financial aid is monetary aid to help you pay for your college education. Aid is made available from grants, college scholarships, student loans, and part-time employment from federal, state, institutional, and private sources. The types and amounts of aid awarded are determined by financial need, available funds, student classification, academic performance, and sometimes the timeliness of application. What is the FAFSA? FAFSA stands for Free Application for Federal Student Aid. The FAFSA is the Federal Department of education’s primary application for financial aid and is the gateway form to just about any other federal, state or private grants, college scholarships, student loans or college work study programs. The FAFSA form must be filled out each year between January 1 and March 10th (although some colleges have their own earlier deadlines) and can be completed online or by mail. Four to six weeks after you file the FAFSA (two to four weeks if you filed electronically), you will receive your Student Aid Report (SAR) which will contain a summary of the information you submitted on your FAFSA and presents your Expected Family contributions (EFC) which tells you the amount your family is expected to contribute towards your education. The amount of financial aid is then determined approximately by the tuition of your college subtracted by your EFC. If you do not receive the SAR within a reasonable amount of time, you can call the Federal Processor at 1-319-337-5665. Review the SAR carefully for errors. If necessary, make any corrections on Part 2 of the SAR and return it promptly to the address listed on the form. You will then be sent a new SAR with the changes made. What is the College Scholarship Services Profile (CSS Profile)? Some colleges also require you to fill out a College Scholarship Services Profile form in addition to the FAFSA. It is a secondary financial aid form that supplies further information about your family income. Be sure to check whether this form is necessary and about specific deadlines with your college directly. What is the difference between a Grant, a Student Loan and a College Scholarship? A grant is free money from government or non-profit organizations that does not need to be repaid. Grants are usually determined by financial need but can also be influenced by academic merit. Unlike grants, student loans are money loaned from an academic institution, financial institution, or federal government that must be repaid. Like a grant, a student scholarship is free money, but is generally offered through colleges, businesses, private individuals and outside sponsors. Those awarded by the college itself are often called MERIT AID. While grants tend to be issued according to financial need, college scholarships are awarded on a broad-base of criteria, the most common being academic merit. Furthermore, to receive any grants or loans you must complete a FAFSA, however, many scholarships may not require you to complete a FAFSA to be eligible. Instead, you may need to obtain application material directly from the donor of the scholarship. What are the different kinds of grants? There are federal as well as campus-based (institutional) grants. Federal Grants are free gift money from the Federal Department of Education while campus-based grants are government funds issued directly from your college. The campus-based grants provide a certain amount of funds for each participating school to administer each year. When the money for a program is gone, no more awards can be made from that program for that year, so make sure you find out about the types of grants awarded by each college you are considering as well as their specific deadline. Below are some of the most common grants. Federal Grants Pell Grants are considered a foundation of federal financial aid, to which aid from other federal and non-federal sources might be added. Pell Grants are usually only awarded to undergraduate students who have not earned a bachelor’s or a professional degree. The amount you get depends on your financial need, your college’s tuition, your status as a full-time or part-time student and your plans to attend school for a full academic year or less. The Academic Competitiveness Grant is a new grant available to first year college students who graduated from high school after January 1, 2006 or for second year college students who graduated from high school after January 1, 2005. Only students who are eligible for a Federal Pell Grant and who has successfully completed a rigorous high school program as determined by the state or local education agency and recognized by the Secretary of Education. An Academic Competitiveness Grant will provide up to $750 for the first year of undergraduate study and up to $1,300 for the second year of undergraduate study for full-time students who are eligible for a Federal Pell Grant. The National Science and Mathematics Access to Retain Talent Grant (AKA the National Smart Grant) is available during the third and fourth years of undergraduate study to full-time students who are eligible for the Federal Pell Grant and who are majoring in physical life, or computer sciences, mathematics, technology, or engineering or in a foreign language determined critical to national security. The student must have also maintained a cumulative grade point average (GPA) of at least 3. 0 in coursework required for the major. The National SMART Grant award is in addition to the student’s Pell Grant award. Campus-based Grants The Federal Supplemental Educational Opportunity Grant (FSEOG) The FSEOG is a campus-based grant aimed at assisting students with exceptional financial need. Pell Grant recipients with the lowest expected family contributions (EFCs) will be considered first for a FSEOG. You can receive between $100 and $4,000 a year depending on when you apply, your financial need, the funding at the school you are attending, and the policies of the financial aid office at your school. What are the different kinds of student loans? A student loan is money that needs to be repaid after you have completed your studies. Generally, interest rates are low- so that you do not rack up as much debt as you would with a credit card or bank loan. There are campus-based loans, which you repay directly to your college, as well as federal loans which you repay either directly to the U.S. government or to your financial institution. Campus-based LoansFederal Perkins Loan The Federal Perkins loan is a campus- based loan because it is administered directly by the financial aid office at each participating school. In other words, your school is the lender although the loan is made with government funds. Your school will either pay you directly or apply your loan to your school charges. You’ll receive the loan in at least two payments during the academic year. You can borrow up to $4,000 for each year of undergraduate study with a maximum of $20,000 for your entire undergraduate degree. The amount you receive depends on when you apply, your financial need and the funding level at your school. The Federal Perkins Loan is a low-interest , 5 % loan for students with exceptional financial need. You must repay this loan directly to your school and you have nine months to begin your repayment plan after you graduate. Generally you will make monthly payments to the school that loaned you the money over a 10 year period. Federal LoansThe U.S. Department of Education administers the Federal Family Education Loan (FFEL) Program and the William D. Ford Federal Direct Loan (Direct Loan) Program. Both the FFEL and Direct Loan programs consist of what are generally known as 1. Stafford Loans (for students) and 2. PLUS loans (for Parents). Schools generally participate in either the FFEL or Direct Loan program, but sometimes schools participate in both. For either type of loan, you must fill out FAFSA, after which your school will review the results and will review the results and will inform you about your loan eligibility. You also will have to sign a promissory note, a binding legal document that lists the conditions under which you’re borrowing, and the terms under which you agree to repay the loan. Stafford Loans Stafford loans are federal loans for students. Eligibility rules and loan amounts are identical under both the FFEL and Direct loan programs, but providers and repayment plans differ. For all Stafford loans first disbursed on or after July 1, 2006, the interest rate is fixed at 6. 8 percent. However, you can be considered for a subsidized loan, depending on your financial need, in which the government will pay (subsidize) the interest on your loan while you’re in school, for the first six months after you leave school and if you qualify to have your payments deferred. You might be able to borrow loan funds beyond your subsidized loan amount even if you don’t have demonstrated financial need. In that case, you’ll receive an unsubsidized loan. Your school will subtract the total of your other financial aid from your cost of attendance to determine whether you are eligible for an unsubsidized loan. Unlike a subsidized loan, you are responsible for you’re the interest from the time the loan is disbursed until the time it is repaid in full. After you graduate, you will have a six month ‘grace-period’ before you must begin repayment. During this period of time, you’ll receive repayment information, and you’ll be notified of your first payment due date. You are responsible for beginning repayment on time, even if you don’t receive this information. You will receive more detailed information on your repayment options during entrance and exit counselling sessions provided by your school. Federal Family Education Loan (FFEL)Funds from your FFEL will come from a bank, credit union or other lender that participates in the program. Schools that participate in the FFEL program, will usually have a list of preferred lenders. Student loan borrowers may choose a lender from that list, or choose a different lender they prefer. Your loan money must first be applied to pay for tuition and fees, room and board and other school charges. If money remains, you’ll receive the funds by cheque or in cash. Besides interests, you will pay a fee of up to 4 % of the loan, deducted proportionately from each loan disbursement. For a FFEL Stafford Loan, a portion of this fee goes to the federal government, and a portion goes to the guaranty agency (the organization that administers the FFEL Program in your state) to help reduce the cost of your loans. Direct LoanUnder the direct loan program, the funds for your loan come directly from the federal government and you will need to repay your Direct Loan to the U.S. Department of Education’s Direct Loan Servicing Center. Like the FFEL loan, you will pay a fee of up to 4 % of the loan. For a direct Stafford Loan, the entire fee goes to the government to help reduce the cost of the loans. PLUS Loans (Parent Loans)Parents can borrow a PLUS Loan to help pay your education expenses if you are a dependent undergraduate student enrolled at least half time in an eligible program at an eligible school. PLUS Loans are available through the Federal Family Education Loan (FFEL) Program and the Direct Loan Program. Your parents can get either loan, but not both, for you during the same enrolment period. They must also have an acceptable credit history. For a Direct PLUS Loan, your parents must complete a Direct PLUS Loan application and promissory note, contained in a single form that you get from your school’s financial aid office. For a FFEL PLUS Loan, your parents must complete and submit a PLUS Loan application available from your school, lender, or your state guaranty agency. After the school completes its portion of the application, it must be sent to a lender for evaluation.



What are the different kinds of scholarships? Scholarships are awarded on a broad-base of criteria, the most common being academic merit. Many scholarships carry conditions besides academic merit, such as financial need, affiliation with a group-, leadership, athletic talent, artistic or musical ability etc. Some scholarships are awarded by the college itself, often called MERIT AID. Other scholarships are awarded by outside sponsors. For some scholarships, you need to be nominated. For most of them, you apply directly to a sponsor. Because there are so many different types of scholarships, you should check directly with your financial aid office at your college. Can I apply for a grant, a loan and a scholarship at the same time? Yes. You can team up different types of financial aid or simply have one kind. Nevertheless, some types of financial aid are contingent on others. For example, you can only receive an Academic Competitive Grant or a Federal Supplemental Educational Opportunity Grant if you have received a Pell Grant. While you cannot team up a FFEL loan with a direct loan, you may be eligible to receive a subsidized loan (in which the interest is paid by the government) and an unsubsidized loan (in which you are responsible for the interest) at the same time. You can also combine grants with loans and scholarships, so it never hurts to try to get as many different varieties of aid as possible!What is the Federal Work Study Program? The Federal Work-Study Program (FWS) is a campus-based program that provides part-time jobs for undergraduate and graduate students with financial need, that allows them to earn money to help pay education expenses. The program encourages community service work and work related to the recipient’s course of study. How often should I apply for financial aid? You will need to apply for financial aid each year. Even if you did not qualify this year, you should reapply next year since financial circumstances can change. The number of family members in college, for example can have a big impact on your eligibility for financial aid. If you submitted a FAFSA during the previous year, you may be able to complete the shorter Renewal FAFSA form instead. The renewal FAFSA will be mailed to your home. The renewal FAFSA preprints most of your answers from the previous year’s FAFSA. Verify that the old responses are still accurate and provide corrections or new answers where appropriate. If you don’t receive a renewal FAFSA by February 15, fill out a new FAFSA form. How do I know whether I am eligible for financial aid? Don’t assume that you will not qualify for financial aid. Nearly all U.S. citizens or eligible non-citizens enrolled at least half the time are now eligible for some form of financial aid. Even if you don’t qualify for a grant, free college info is still available, and you may still be eligible for other forms of financial assistance. Many families don’t apply for financial aid, because they believe that they earn too much money. However, you don’t need to be from a low-income family to receive financial aid. Some loans and scholarships are available regardless of need. Many factors are used to determine your eligibility for financial aid and there is no simple cut-off base on income. You can’t get aid unless you apply!!

CampusCompare facilitates the college search and selection process by providing free information, student college reviews, and interactive media, connecting students to over 3000 colleges. Its helpful tools include the What Are My Chances tool and the Financial Aid Calculator to help students in the “match me with a college” process.



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There is good news for Hispanic families on a budget searching for a way to pay for higher education costs: College bound Hispanics can benefit from increasing scholarship opportunities. This year, Hispanic students have a wealth of scholarship options. Just as frenzied students are selecting college programs or planning their return to school, many Hispanic organizations are announcing scholarship funding programs and guidelines for the school year beginning this fall.

Offering scholarships to minority and disadvantaged students has gained popularity. Corporate giants like CNN, Coors, General Motors, Lockheed Martin, MasterCard, NASCAR, Office Depot, Sallie Mae, Time Warner and Wachovia are among the companies providing scholarships to Hispanic students this year. Why are these do-gooders dedicating thousands of dollars to Latino scholarships and what can other companies learn from them?

While each one of these companies may have more than one reason to support existing Hispanic scholarship programs established by Latino organizations such as the Hispanic Association of Colleges and Universities, National Association of Hispanic Journalists, Hispanic College Fund and Hispanic Scholarship Fund, most benefit from the positive community and public relations results the programs generate.

Over the years, Latino consumers have become increasingly acculturated into mainstream America. Some have gained positions of influence in the public and private sectors and most have become more sophisticated consumers. Part of the process has resulted in the realization for some that they have been neglected and even mistreated by many companies that ever since the 2000 Census target them as consumers for their products and services.

At the same time, marketers and communicators have begun to wise up to the growth and potential of the Latino markets with many keeping their eye on of the future prize of the rapidly growing Hispanic buying power, estimated by The Multicultural Economy, 1990-2009, report from the Selig Center for Economic Growth to near $700 billion a year. Scholarship programs are a relatively inexpensive means of generating good will among future consumers of their products and services. At the same time, the recipients of the scholarships may also become members of their future workforce.

There are critics who argue that in some cases the scholarships are too few in relation to the total number of students in need. And that they are the direct result of criticism of exclusionary policies that have denied Latinos their fair share of the American pie. That may very well be true. And yet, more students than before are benefiting from scholarship programs. As they graduate and join America’s working hordes, they too will impact the future and perhaps generate additional programs.

The good news is that this results in opportunities for Hispanics students and benefits the donors in multiple ways. The impact is immediate as Latino communities and leaders become aware of the programs. There are also long term effects as the recipients go to school and eventually graduate with an appreciation toward the company that made it possible, in part, for them to complete their studies.

At the same time the Internet has made scholarship hunting much easier and possible for many students who a few years ago would have been limited to their school counselor’s advice and other local resources. The generation entering America’s colleges and universities has better access to online resources, including information on scholarships and who funds them, than any other before it. Smart companies are banking on the benefits by putting their money where their corporate mouths are and funding Latino scholarships. And equally smart Latino students are taking advantage of the increasing opportunities.

If you are a black American and you’re looking for a scholarship then you are in luck because there are hundreds of opportunities available to you right now.

An African American scholarship gives you money for your education so that you are not forced to resort to an expensive student loan scheme that will leave you in debt for many years.

Some of the best scholarships to apply for are:

Deborah Wolfe Fellowship

This is for students who wish to study abroad. This money will allow you to gain unique experience studying overseas – something that will change your life.

National Black Nurses Association Ambi-Kiwi Scholarship

If you plan to major in nursing then consider this excellent scholarship program. The NAN Association is located in Washington, DC.

Mansfield University Board of Governor’s Scholarship

This $1500 scholarship is for black students who plan to study at Mansfield University. There are 7 of these college scholarships given away to freshmen every year.

Dr. Marie-France Desrosiers Memorial Scholarship

If you plan to study at Barry University majoring in Psychology then you could be eligible for this African American scholarship that provides exceptional opportunity to start your career in this highly sought after field.

Oakwood College United Negro College Fund

To be used at Oakwood College in Huntsville, AL. This scholarship is worth $2000 and is available to College Freshman.

Nancy Wolridge Graduate Fellowship

Open only to female black Americans, you will have a good chance of getting this scholarship since there will be no competition from male students.

You’re minimum GPA must be 2.0 to qualify.

These are just some of the hundreds of black scholarships available to you – so apply for as many as you can to improve your chance of winning!

How can you save for the cost of higher education? Here are some ideas that can help regardless of how close you are to that first tuition payment.

Based on the mathematics of compound interest, we should start our college savings and retirement funds the day we start our first job. There are more than a few obstacles in the way; food, shelter, paying off your own college loans and raising children.

The best approach is to start a plan as soon as possible. Part of the plan includes having a set amount deducted from your paycheck for the purpose of college funding. If you don’t see it, you won’t spend it and a great place for your college fund is a 529 College Savings Plan.

The 529 College Savings Plan provides key advantages in savings. First, the earnings are allowed to accumulate tax-free. Second and more important, there is a 10% tax penalty on the earnings if the funds are used for purposes other qualified expenses. I like the penalty for two reasons, it is more difficult to withdraw money when you have to pay a penalty and even harder to tell the kids your new boat was once their college fund.

The 529 Plan can be funded with up to $60,000 per beneficiary per year, the beneficiary can be changed and the account is controlled by the parents. For financial aid purposes the account is considered an asset of the parents and not the child which provides a lower weighting in the financial aid process. I highly recommend that every parent and child research and understand the financial aid process.

The 529 Plan is also an excellent estate planning option for the grandparents since they can use the annual gift exclusion of $12,000 (in 2007) to fund a non-taxable gift or can elect to fund up to $60,000 with a special five-year election. A couple can fund twice these amounts. For most of us, an automatic deduction of a much lower amount is the most likely mode of funding.

Other savings options include the use of the Coverdell Education Savings Account (ESA). Annual contributions may not exceed $2,000 per beneficiary per year, the beneficiary must be under the age of eighteen and the taxpayer’s ability to fund a Coverdell ESA is phased out. Like the 529 Plan, the earnings are tax-deferred and are not taxable if they are used for qualified expenses.

U.S. savings bonds issued after December 31, 1989 may qualify for interest exclusion if they are in the name of the purchaser who is over the age of 24 and used to pay for the qualified higher educational expenses of the taxpayer, their spouse or dependents. The interest exclusion is phased out for at higher income levels.

Just to add another level of complexity, qualified expenses for all three savings options are different as are the phase limits for the Coverdell ESA and the interest exclusion on U.S. savings bonds.

My preference is the 529 Plan as it provides greater flexibility in terms of who can fund the accounts and the higher funding amount. The 529 Plans are offered by several low cost investment managers. Keep in mind that a key element in increasing your investment returns is to keep fees and expenses to a minimum.

Once the children start their higher education you may qualify for a few important tax breaks. Naturally they are limited based on income.

There is the HOPE Credit. Individual tax payers are allowed to claim a credit against their Federal income taxes up to $1,650 in 2007 for the first two years of a student’s post-secondary education or certificate program at an eligible institution. The student must also be enrolled on at least a half-time basis. The credit amount and income limitations are indexed for inflation.

The HOPE Credit is on a per-student basis. If you have more than one child in college even the IRS feels sorry for you; however, the HOPE Credit is phased out for taxpayers with a modified adjusted gross income between $40,000 and $50,000 ($80,000 and $100,000 for joint returns).

The Lifetime Learning Credit is available to students enrolled in an eligible education institute. Enrollment can be less than half-time as long as the student is taking undergraduate or graduate classes to acquire or improve job skills. The Lifetime Learning Credit can be used to reduce your Federal income taxes by up to $2,000. The credit is based on 20% of the qualified tuition and fees paid during the year. The Lifetime Learning Credit is phased out using the same limits as the HOPE Credit.

The credits cannot be combined. You cannot use the HOPE Credit and the Lifetime Learning Credit for the same child in the same year. You can use the HOPE Credit for one child and the Lifetime Learning Credit for different children in the same year.

If you have eligible work-related educational expenses and include the expenses in your itemized deductions you cannot use the Lifetime Learning Credit for those expenses.

Student loan interest is another potential tax savings. Rather than being a tax credit, up to $2,500 student loan interest is deductible from taxable income. As with other deductions, this one is also subject to phase out.

If the tax aspects seem overwhelming, your tax preparer or several of the tax software packages will determine how to get the most from the various credits and when the credits are phased out.

My final recommendation is to get a jump start on saving by understanding your options, what is available for tax benefits and to research the financial aid process. There are several excellent sources of information on the financial aid process. I particularly like the services of Octameron.Com. They have several inexpensive books that will greatly help you understand both the admissions and financial aid process.

If you are searching for some creative funding to pay for school, unusual scholarships might be the answer. Did you know that there are thousands of dollars in free money for college that go unclaimed each year because eligible students fail to apply for these oddball awards? You could very well be eligible for these unusual scholarships if you know where to look.

As weird as it may seem, you can earn money for school for being unique. Here are some of the best ways to find some of these unclaimed and low competition scholarships that you could very well be eligible for.

Watch the media around you. Commercials, magazines, newspapers, and bulletin boards are great places to spot odd scholarships. For example, the Coca Cola Company sponsors a scholarship with the main criteria based on being a first generation college student.

Get a list of scholarships offered by the college you interested in attending that includes the criteria. Some of these lists are not published or distributed to students but instead remain within the financial aid office of a school and are matched to students who are viewed as eligible.

Check with organizations you are involved with or those that support your interests or hobbies. For example, the Vegetarian Resource Group awards money for school to students who promote vegetarianism within the community and write an essay about being a vegetarian.

Online. The internet is without a doubt the number one way to find unusual scholarships. There are many databases that allow you to search for contests and awards based on your own personal characteristics and criteria. The best custom search I have found is on unusual scholarships, and it is completely free.

Starting college is a big milestone in anyone’s life. In some families, starting college is almost like getting married – it’s a big step, a giant move towards independence. Everything that happens during college counts towards the future – that’s why it’s so important for students to start college on the right footing.

First of all, see if you have everything all pinned down before you start college. If your college is going to be quite a distance away from home, you’ll need to find a place to stay. And if you’ve already found a place to stay, you’ll need to find roommates who can share the rent with you. You’re only starting college and finances are going to be tight – with someone sharing the place with you, you can bring the expenses down.

The next thing that you have to decide on before starting college is the mode of transportation. Your options are…college car, a motorcycle or a bicycle. The mode of transportation depends on how far you are going to be housed from the college. If you’re within college campus, you can probably start with a bicycle. If you’re located outside the college campus, you might need a car to get you around.

Next, go shopping for college clothes. A whole new wardrobe is necessary only if you are moving to a place where the weather is very different from where you live, for example, your home is in Maine and your college California. Otherwise, you can probably live with what you already have in your wardrobe. If you don’t know the kind of clothes you will need for college, why not factor the cost of a new wardrobe into your starting college funds. You can go do some shopping when you’ve started college. Living on your own and starting college also means that you’ll have to do some calculations on the use of kitchen utensils (getting some of your own is a good idea), and also some entertainment. Yes, you’re starting college but you still need to have some fun once in a while.

Starting college means that you’re probably going to need your own computer, printer and scanner too. Most colleges have these facilities in their college campus. The options are:- buy new ones if you can afford it before you start college, buy second-hand ones, loan one from your relatives or parents, use the ones available in college or pay for the services in Internet cafes where these facilities are widely available. Research the area near the college and see if there’s a need to get your own electronics. If you can save the money for something else, you can start college without it and use the ones in the college first.

If you have reasons to want to move tables, beds, furniture and shelves from home, this could save your parents some money. Starting college is already ripping the bank accounts apart, so, if you can save on furniture, why not? If you’re bringing the furniture from home, find a relocating service contractor to help you move the furniture to your new place.

Most importantly, before starting college, you’ll need to get a list from your college so that you can purchase the books before college starts. It is best that you start college on the right footing, so, don’t wait until all the books are gone.

Starting a savings plan for a child’s college education can be a daunting task initially with so many avenues for setting up a savings plan that is somewhat flexible and yields a high return for your child.

The best advice is to start early and parents can initiate a savings plan as early as birth and grow the nest egg over many years. If you start early you can be gaining the advantage of interest on the funds in tax benefits which add growth to your plan. Instead of gifts for your child, relatives and grandparents can also contribute to your child’s college fund.

For some a 529 plan makes good sense and can compliment the financial aid plans offered. For some parents they have multiple children that will attend college at the same time, and where the financial demand is doubled. A 529 Plan is a state educational savings plan which was established to help families save for future college expenses. If you follow the guidelines for the plan it can provide some federal tax benefits to you.

There are two categories of 529 Education plans and they are a savings plan or a prepaid plan and also some plans have a combination of both plans. Educational institutions can offer the prepaid plan only however you may purchase a plan with a Broker, a direct sold savings program, a prepaid contract or a prepaid unit/ guaranteed savings plan.

For instance with a New York 529 College Savings Program plan you would enroll with a broker and there are no state residency requirements and will accept contributions to a maximum of $ 358,496.00. Some traditional college education investors would argue that tax efficient mutual funds can yield higher returns and that with a 529 plan the costs outweigh the tax benefits.

The 529 savings plans do have a fee associated with administering the plan or a management fee. However there are reasons why a 529 plan are a better investment than some of the tax mutual funds. One is that some mutual funds will have year end capital gains that are taxable. Secondly, when you liquidate the mutual fund to pay for college education the appreciated value is also taxed.

Rising tax rates also will affect the rates on most capital gains on the long term are traditionally lower at only 5 % for income in the ten percent or fifteen percent tax brackets, and fifteen percent for everyone else. In the next three years, tax on capital gains is expected to rise to ten and twenty percent. As your child approaches college age a 529 Plan will reduce the equity exposure you have built up over the years without tax penalties. But with taxable mutual funds there is a tax on the built up equity unless you want to pay the tax to switch into another plan.

Finally the capital gains income can affect the financial aid eligibility for the next year which would disqualify your child for the need based financial aid. With a 529 plan there is no income to report when the distributions come out tax free and financial aid eligibility is still protected. The good news is that the costs of a 529 plan are dropping due to competition and contract renewal negotiations in the near future.