What Moms Want To Know

Should You Ask Grandparents for College Tuition Help?

I read an interesting article in my newspaper the other day.  Carolyn Stark of The Chicago Tribune wrote an article about whether or not parents should ask grandparents for help with saving for college tuition.  With one young son, another on the way, and (if I can talk their daddy into it) a third one coming in the next couple of years, the staggering cost of their college educations weighs pretty heavily on my mind. 

My parents pretty much provided me with a free ride to college and even paid for graduate school.  Looking back, as much as I hate to admit it, I totally took their generosity for granted.  And, although I did take it for granted, since my parents provided so much for or me, I have always just assumed that I would do the same for my kids. 

Now though, as I study the numbers and see the tremendous estimates of what a public education will cost in eighteen years (let's not even talk about private tuition) I'm not so sure we'll be able to pay for everything for them.  Not that it would be the end of the world, plenty of my friends got by fine on student loans, and may even be better off for having done so.  I am just trying to come to terms with the very real possibility that I may not be able to provide for my children the same way my parents provided for me.  But that doesn't mean I'm not going to try.

Which leads me back to my point, should you ask grandparents to help pay for college?  My mom certainly isn't shy about spending money at Gymboree.  And I'm certainly not shy about making suggestions for Christmas and birthday gifts, but asking for tuition help?  I think that may be a line I just can't cross.  I would certainly take them up on any offer of college tuition help, but I don't think I could ask for it.  Afterall, they have their retirement to think of, and they've raised (and paid for) their kids.  Isn't it time for them to be done?

This is an interesting aspect to think about and one that might work for some but probably not me.  If they offer help, you can bet that I'll take it faster than my son can down a cup of ice cream, but I don't think I'll be asking any time soon.   

529 Plans

If you, like most parents, are worried about the skyrocketing costs of college tuition, then you probably have spent some time worrying about how in the world you are going to save enough money to pay for it.  There are a few options out there, one being a 529 Plan. 

529 plans are set up by states or educational institutions and provide tax breaks to assist you in saving for your child's college education.  Federal tax breaks are provided to the plan owner and some states offer tax incentives as well.

There are two types of 529 plans.  One is prepaid, you prepay your child's tuition at a much lower rate than it will be when he or she enters school.  Generally, the younger your child when you purchase the plan, the less expensive it is.  Prepaid plans are intended for use in the state in which the plan originated.  You can use them at out-of-state schools, but there will probably be a penalty for doing so.

The other type of 529 plan is a savings plan.  This plan allows you to invest in mutual funds or other investments, but unlike "regular" investing the earnings on this money are sheltered from federal  income tax if that money is used to cover higher education expenses.  Savings 529 plans can be used at any accredited university.  For example, if you purchased the plan in Tennessee, your child can attend an accredited university in California without a problem.

One huge plus of 529 plans is that you maintain control of the money in it.  If your sweet daughter decides that she would rather tour the islands of the Caribbean than attend college, she has no legal rights to the money.  It's all yours; go buy a boat or a new Corvette save it for when she comes to her senses.  You will, however, lose the tax benefits plus a 10% penalty if the money is not used towards higher education.  Keep in mind, that only the earnings are taxed and penalized, not the principal.  You already paid Uncle Sam for that.  (The principal is the amount you paid in.)

529 plans can be switched to another child's name.  If your son or daughter earns a scholarship or decides not to attend college, the plan can be transferred to another child without penalty.