Edward is a Certified College Funding Specialists...Visit his site at the link below Association of Certified College Funding Specialists
One quick question: When our children graduate college and we paid cash, took loans or used a 529 plan; where is the money? The reality is it is NOT in any of our financial accounts.....
Paying for college options:
1) 529 plan – Many issues
2) Pay cash – Lost opportunity costs
3) Pay with loans – More lost opportunity costs
4) College 10 Pay Plan
5) Our plans
#1 Saving in a 529 plan has many disadvantages which normally do not get discussed with the investment advisor.
a) The money in the 529 plan will count against any financial aid or scholarship our student receives
b) The money is at risk of loss and may not be there when the student is ready for college. Talk to some parents ready to send their children to college in 2008.
c) There are high fees within the 529 plan added to the high fees within mutual funds. Wall Street always wins.
d) Heavy taxes if the money is not used to send our children to college.
#2 Paying with cash – The issue here is the money is gone from our wealth and is now part of the college wealth program. As an example: If we spend $100,000 for a college education then the $100k is not working for us anymore (or never will be). If the $100k had remained in our account (or added to our account) it would have doubled every 10 years at 7.2% (the rule of 72). Therefore, in 10 years we would have $200k, in 20 years $400k and in 30 years $800k. Not having this money in our account to achieve the gains is call lost opportunity costs.
#3 Paying with loans – This option is worse than paying with cash because we loose your principal and now you loose dollars to interest on the loans. Even a greater lost opportunity cost situation!
#4 Some colleges allow us to pay over 10 months starting a few months before school starts. Again this is like paying with cash.
#5 Our plans are custom designed for each family. It is not a one shoe fits all. They provide:
a) Safety of our money – suffer no loss because of market turn down; yet receive potential of double digit interest credits
b) Tax deferred growth with tax free distribution
c) Use the money when and how we wish – If the child does not go to college the dollars are not lost or taxed.
d) If the dollars are not used they can be saved to be part of a tax free retirement plan.
Visit Edward's Certification at https://www.certifiedcollegefundingspecialists.com/edward-sanders/
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