In this issue:
- Introduction & Special Note
- Featured Sponsor: Private Student Loans
- Featured Sponsor: Travel Medical Insurance
- Feature Article: Understanding Section 529 Plans
- Scholarship Notes
- Scholarship: Discover Card Tribute Award Scholarship
- Scholarship: Wal-Mart Higher REACH Scholarship
- Scholarship: Walton Family Foundation Scholarship
- A Word from our Sponsors
- Privacy and Subscription Information
- Back Issues
- Sponsor this newsletter!
Welcome to the July 2004 issue of The Financial Aid News. Happy Independence Day to American citizens everywhere. This month's Financial Aid News gives you our most in-depth article yet, covering Section 529 savings plans! If you've ever been curious about these plans and how they can work for you, this issue is for you!
Have you visited FinancialAidNews.com? The Financial Aid News web site provides you with the back issues of Financial Aid News, so that if you missed an issue or your email address unexpectedly changed, you'll still get to read the articles you need. As always, please share The Financial Aid News with your friends, family, and colleagues, by simply forwarding this message, or letting them know to subscribe by visiting www.FinancialAidNews.com today!
Enjoy this month's newsletter!
The Financial Aid News
1250 Hancock Street, Suite 703N
Quincy, MA 02169
Featured Sponsor: Private Student Loans
With increasing costs in education and fewer federal dollars than ever, there has never been a better time to look at federal student loan alternatives. The Student Loan Network is now accepting applications for alternative student loans for summer 2004 and the fall 2004 school year. Alternative student loans present many benefits to students, parents, and families.
Alternative student loans:
... can be used at all levels of education, from K-12 to continuing education
... require NO FAFSA or other financial aid paperwork
... have no application deadlines, so you can apply whenever you need it
... fund quickly, in as little as 5 business days
... fund directly to you, so you have flexibility to make payments at your convenience
... are credit-based, not need-based or income-based
Learn more, read frequently asked questions, or apply today for an alternative student loan at:
http://www.AlternativeStudentLoan.com
Featured Sponsor: Travel Medical Insurance
Make sure you've covered on the beaches this summer - with insurance. Travel medical insurance is available for students and non-students alike, with flexible coverage and competitive rates. Get the peace of mind you need while traveling!
Visit: http://www.InternationalStudentInsurance.com today!
Featured Article: Understanding Section 529 Plans
Named after the section of the federal tax code that governs them, 529 plans are tax-advantaged programs that help families save for college. Selecting a plan requires homework. Almost every state offers at least one 529 plan, and the tax advantages, investment options, restrictions, and fees can vary a great deal. Beginning in 2002, even more choices became available, as many colleges are able to offer 529 plans too.
Before buying a 529 plan, you should find out about the particular plan you are considering. Request an offering circular or official statement from the plan sponsor or your financial professional. Most 529 plans provide this document on their Web sites.
Two Types of 529 Plans
There are two types of 529 plans - prepaid tuition plans and college savings plans. Every state offers at least one of these types of plans or is developing one. Some states offer both, and many of these plans are open to non-residents.
Prepaid Tuition Plans
Prepaid tuition plans allow parents, grandparents, and others to lock in today's tuition rates at any of a state's eligible public colleges or universities so that they don't have to worry about future tuition increases.
Contribution Limits
You pay for amounts of tuition (years, credits, or units) in one lump sum or through installment payments. There are a number of options. Some states offer contracts for a two-year community college or a four-year undergraduate program, or a combination of the two, and can cover one to five years of tuition. Some states even allow the contract to be applied to graduate school tuition.
Covered Educational Expenses
With only a few exceptions, however, most prepaid college plans do not cover other expenses, such a room and board. So you may want to consider other college savings options to cover these costs.
Residency Requirements and Other Limitations
Unlike college savings plans, most prepaid tuition plans require either you or your child to be a resident of the state offering the plan when you apply. Some limit enrollment to a certain period each year. Many prepaid tuition plans also have age or grade limits for beneficiaries (i.e., future college students).
Investment Options
Prepaid tuition plans have no investment options. Under prepaid plans, the price of the contract is determined prior to purchase and usually depends on the type of contract, the current grade of the beneficiary, the current and projected cost of tuition, and the projected rate of return. These programs then pool the money and make long-range investments so that the earnings meet or exceed state college tuition increases. When a child is ready to go to college, the plan transfers funds to cover the tuition directly to the institution.
Portability If your child chooses not to attend an in-state public college, all is not lost. All prepaid plans allow you to use plan money to pay tuition at most private and out-of-state public schools. Many prepaid tuition plans will pay out an amount equal to the weighted average tuition and mandatory fees at your state's public institutions, not to exceed the actual tuition and fees you incur. All prepaid plans also let you transfer the plan to a child's brother or sister (although age restrictions may prevent transfers to an older sibling). Unfortunately, if your child chooses not to go to college and a sibling doesn't use the plan, or you need to cancel the prepaid plan, most states will only give you back what you originally contributed with a reduction or elimination of any interest earned. Some plans also charge a cancellation fee.
College Savings Plans
With college savings plans, students of all ages can save for all college costs, including tuition, fees, room, board, textbooks, and computers.
Not Just for Children!
If you are considering going back to college or graduate school, you can open a college savings plan for yourself. You will save on taxes and if you end up not going to school, you can always transfer the money, tax-free, to another 529 plan for your children or spouse.
Not Limited to In-State Public Colleges or State Residents
Withdrawals from college savings plans can be used at most colleges and universities throughout the country, including graduate schools. Some foreign education institutions also may be eligible. Many states now offer at least one college savings plan that has no residency restrictions. You can live in Ohio, contribute to a plan in Maine, and send your child to college in California. However, if your state offers state tax advantages to residents who participate in the local plan, you'll miss out if you opt for another state's 529 plan.
Covered Education Expenses
College savings plans typically cover all "qualified education expenses" at eligible colleges, universities, and other post-secondary institutions including:
* Tuition
* Fees
* Books and supplies
* Equipment
* Room and board
Contribution Limits
When you invest in a college savings plan, you pay money into an investment account on behalf of a designated beneficiary. Contributions can vary and are only limited by the maximum and minimum contributions limits set by most plans. Although the maximum amount of contributions differs from state to state, in the majority of states offering college savings plans, the maximum amount that you can contribute for one beneficiary exceeds $200,000.
To further increase the amount of contributions you can make, you can open a second college savings plan in another state. Currently, the IRS only requires that contributions for one child cannot be more than the amount necessary for the qualified higher education expenses of that child. So if you want your child to go to an expensive college and graduate school, one option you have is to open more than one college savings plan.
Most states also offer very flexible minimum contribution limits. Many require a $250 initial contribution with subsequent contributions of as little as $50. These minimum contribution amounts can be reduced even further in many states if you make contributions through payroll deductions or automatic transfers from a bank account.
Fees, Charges, and Expenses
All 529 plans have various fees and expenses. Not only do these charges vary among 529 plans, but also they can vary within a single 529 plan. With college savings plans, there are an even wider variety of fees and expenses. Like mutual funds, some college savings plans have different classes. Often referred to as Class A, B, or C shares, units or fee structures, each class has different fees and expenses. You can look at the offering document to see if a particular college savings plan offers more than one class.
It is very important to take fees and expenses into account when selecting a college savings plan. Slightly larger fees and expenses can make a big difference in the value of your investment over time. Let's say you invest $10,000 in a college savings plan with a return of 10% before expenses. With a plan that had annual operating expenses of 10.97% (Yes, one plan has expenses that can be this high!), after 18 years, you would end up with only $6,866. That's over $3,000 less than you started with. If the college savings plan had expenses of 0.85%, you would end up with $47,680 - an 85% difference!
Here's a list of some of the most common fees, charges, and expenses found in college savings plans:
* Enrollment Fee. Several college savings plans charge a minimal enrollment fee. Currently, the highest enrollment fee is $90. Most enrollment fees are under $50.
* Annual Maintenance Fee. Most college savings plans charge annual maintenance fees. These fees usually range from $10 to $50. Many plans reduce or eliminate this fee for residents, if you make automatic contributions, or if you maintain a certain balance, typically $25,000.
* Sales Charge (Load). Several college savings plans charge a sales charge when you buy certain investment options within a plan or purchase a plan through a broker or investment adviser instead of directly from the state. Generally, you can determine the sales load by looking at the fees and expenses section of the offering circular or prospectus. Not every plan has a sales load. The load also may differ between classes in a single plan.
* Deferred Sales Charge. A deferred sales charge or contingent deferred sales charge (CDSC) is a charge you pay when you withdraw money from an investment option or college savings plan. It is sometimes referred to as the back-end load. The charge may start out at 2.5% for the first year, and get smaller each year after that until it reaches zero. Generally, you can determine the deferred sales charge by looking at the fees and expenses section of the offering circular or prospectus. Not every college savings plan has a deferred sales charge. In some plans, a deferred sales charge also may be levied on certain classes of the plan.
* Administration/Management Fee (Expense Ratio). This is the total annual college savings plan operating expenses expressed as a percentage of the plan's assets. For example, an expense ratio of 1% represents an annual charge to the plan's assets - including your proportional interest in those assets - of 1% per year.
* Underlying Fund Expenses. Because college savings plan portfolios typically invest in a number of mutual funds, they bear part of the fees and expenses of these underlying funds. This expense is expressed as a percentage of a mutual fund's assets. Because college savings plan investment portfolios sometimes invest in a number of mutual funds, the offering circular or prospectus may contain fund expenses percentages for each of these funds.
Learn more about Section 529 plans and sign up for one at:
http://529solutions.com/open/index.cfm?PartnerID=4
This month, the corporations weigh in with their contributions to education!
As always, we remind you that this is a very, very, very small fraction of the scholarships available to students everywhere. We encourage you, if you want to get the maximum amount of free money for college, to enlist the services of our scholarship experts. We've sorted through over 2 million scholarships worth $14 billion.
Visit http://www.financialaidofficer.com/scholarship_search/
to gain access to your premium scholarship search service. For a nominal fee beginning at $29.99, you can find scholarships that meet YOUR needs.
Scholarship: Discover Card Tribute Award Scholarship
Discover Card, in cooperation with the American Association of School Administrators (AASA), sponsors the Tribute Award Scholarship Program to applaud exemplary accomplishments and to support continued education and training beyond high school. Up to nine scholarships are offered in each state and the District of Columbia, plus up to nine national awards—over 460 scholarships in all!
Who is Eligible for the Tribute Award?
Any current high school junior who meets the following qualifications is eligible:
* Is enrolled in an accredited public or private high school in the United States
* Has at least 2.75 cumulative grade point average (GPA) on a 4.0 scale for the 9th and 10th grades
* Demonstrates accomplishments in Special Talents, Leadership, Community Service and has faced a significant roadblock or challenge.
Visit: http://www.discoverfinancial.com/data/philanthropy/tribute.shtml
Scholarship: Wal-Mart Higher REACH Scholarship
The Wal-Mart Higher REACH Scholarship is awarded to non-traditional students who have been employed by Wal-Mart Stores, Inc. for at least one year as of February 1. Winners may receive up to $2,000 payable over one year (award amount varies depending on part-time or full-time enrollment). Applicants must be out of high school for at least one year in order to qualify. Additional eligibility requirements are listed on the actual applications. This year alone, over $67,000 was awarded.
Visit: http://www.walmartfoundation.org
Scholarship: Walton Family Foundation Scholarship
The Walton Family Foundation Scholarship is an $8,000 scholarship payable over four years. Applicants must be graduating high school seniors in order to qualify. All applicants must be the children/legal dependents of Wal-Mart Stores, Inc. associates who have been employed full time (32 hours per week or more) for at least one year as of February 1.
Visit: http://www.walmartfoundation.org
And now a word from our sponsors...
Celebrate your independence...
... from high student loan payments with a Federal student loan consolidation. Reduce your monthly payment by as much as 56%, and take advantage of the lowest student loan rates in 39 years. Lock in your loans with super-low fixed rates, improve your credit rating, and have more cash in your pocket at the end of each month.
Apply now! Visit http://www.StudentLoanConsolidator.com today!
Public Service Announcement
Are you an American citizen/permanent resident that is eligible to vote this fall? Register to vote in the upcoming elections.
http://www.rockthevote.com/rtv_register.php
The Financial AId News does not endorse any political position or stance, except to say that all eligible citizens should participate in the electoral process, college students included. Please vote. If you are not eligible to vote, please encourage all your friends and family members that are eligible to vote!
Alternative Student Loan Program Notes
The Alternative Student Loan program is open to all college and graduate students, as well as continuing education students and parents of K-12 students, attending TERI-approved schools. A co-signer is strongly recommended. The lender for this loan program is Charter One Bank, N.A., a Member FDIC and Equal Opportunity Lender. Alternative Student Loans are guaranteed by TERI, The Education Resources Institute, Inc., a non-profit association.
http://www.AlternativeStudentLoan.com
Privacy & Subscription Information
You can always change your subscription options by visiting our subscription page, located at:
We value your privacy. We do not under any conditions sell, rent, share, or distribute your email address at any time unless you specifically request that we do so by applying for a specific product or service. Organizations and companies that wish to communicate with you must do so by sponsoring our newsletter.
Would you prefer to read Financial Aid News as an RSS feed? You can! We update the feed for each issue. You can subscribe to it using FeedReader or any RSS/XML feed reader at:
Subscribe to our podcast in 2 easy steps!
- Download iTunes and install it.
- Click here to subscribe!
If you wish to write us via postal mail, you can direct correspondence to:
The Edvisors Network, Inc.
1250 Hancock Street, Suite 703N
Quincy, MA 02169
Missed an issue? Did you remember a scholarship but can't find the back issue? You can always find back issues of the Financial Aid Newsletter at:
Want to tell a friend about the newsletter? Forward a copy to them, or have them visit:
Sponsor the Financial Aid Newsletter!
Sponsorships are limited to one per month. Your Sponsorship message in the newsletter will be delivered to more than 779454 subscribers, many of whom forward the newsletter to friends, associates and customers. If you would like us to consider you or your company for Sponsorship, please send email to: newsletter@financialaidnews.com
Share this page!
