Jake Kane

Financial Advisor, Managing Director - Investments

College Savings Plans

  • Saving for your child’s or grandchild’s education doesn’t have to derail your retirement savings plan.
  • 529 plans and trust funds are designed to help save for a child’s education.
  • Financial aid and private loans may be other options.  

Retirement vs. education


As a parent or grandparent, you’re probably considering how to balance paying for college while planning for your retirement. Many families use some combination of savings, investments, borrowing, and financial aid (if available). 

There are options for financing college, but you can’t borrow for retirement. Wells Fargo Advisors believes  saving for retirement should be the higher priority for many investors. 

If your employer offers a 401(k) plan, consider putting your savings there first, especially if there is a company match. After that, contribute to your child’s education account.
 

Save as early as possible


As you can imagine, the sooner you start saving for your child’s or grandchild’s education, the more money you may have later. 

One popular way to save is the 529 college savings plan. These are tax-advantaged accounts administered by states and institutions. Parents, grandparents, relatives, and friends can contribute.  

Other college savings accounts include custodial accounts in the child’s name and Coverdell Education Savings Accounts. 

Please consider the investment objectives, risk, charges and expenses carefully before investing in a 529 savings plan. The official statement, which contains this and other information, can be obtained by calling your Financial Advisor. Read it carefully before you invest. 

Qualified Coverdell Education Savings Account distributions are not subject to state and local taxation in most states.


Establish an educational trust fund 


Setting up an educational trust fund designed for your child’s education is also an option. When a grandparent or benefactor establishes an education trust, the terms of the trust can be specified. This can include who controls the money, how it will be used, and for whom the trust benefits. 

It’s a good idea for grandparents to involve parents when it comes to helping with college savings. How they choose to save could impact any potential financial aid the child may receive. 



Consider financial aid 


A variety of factors play into financial aid eligibility. Don’t assume your child or grandchild won’t qualify for financial aid.  

Start thinking about applying for aid during high school. Visit the U.S. Department of Education’s Financial Aid Office for information about eligibility requirements, application deadlines, and types of federal financial loans and aid. 

For nonfederal financial aid, visit the College Board’s College Scholarship Service (CSS)/Financial Aid PROFILE® application for information on qualifying. 


Go private 


Borrowing from a private lender is yet another option. Banks, credit unions, and other financial institutions provide private loans. Loans may be fixed or variable depending on the lender and the borrower’s credit rating. 

Other things to consider when borrowing from a private lender: 
  • Private loans are generally more expensive because they may have higher fees.
  • If the student takes out the private loan, the student is responsible for repayment.
  • A parent may be required to co-sign a loan.
  • Look for family relationship discounts, automatic payment discounts, and graduation benefits. 

Factor in income and existing investments


Other investment sources may help pay for college, and keep you from tapping your retirement savings. Those may include stocks, bonds, and mutual funds.


It’s a balancing act 


As you plan for the future, keep in mind the three C’s of college funding: consistency, communication, and compromise. 

Planning for retirement, managing your investment portfolio, and funding a college education is a balancing act. The trick is to plan ahead. 

We can help you come up with a plan that considers all aspects.


Next steps 


  • Ask us how you can save for both retirement and education.
  • Start saving for college when your child or grandchild is young.
  • Even if you don’t think you’ll qualify, apply for financial aid.

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