Wealth Logic Solutions

A tool to help you determine how much you need to save for your child’s education, Monthly Savings Needed to Accumulate $100,000, appears below. To use the tool, you’ll need a good estimate of the cost of your child’s education, based on the year in which you expect he or she will enter college. To come up with an estimate for specific years and/or specific colleges, you can use the college cost calculator at The College Board website.

Once you’ve approximated the total cost of your child’s education based on the year in which he or she will begin, you’ll be able to determine how much you need to save on a monthly basis to reach your goal. The Table shows monthly savings amounts based on number of years you have to save and projected savings growth.

If you project your savings and investments will earn six percent, and you have ten years to accumulate savings, the table shows that you will need to put away $610/month to accumulate $100,000. Returns mentioned are hypothetical, and are not intended to reflect any actual investments.

Assume that instead of $100,000 you want to save $160,000. That amount is 1.6 times as much as $100,000. Therefore, instead of saving $610/month, you would need to multiply $610 by 1.6 to determine how much to save monthly; in this case you need to save $976/month to accumulate $160,000 for college costs.

More examples for adjusting the savings— up or down from $100,000 — appear below.

FROM http://www.metlife.com

Even if you start early, it may be impossible to save enough for your child’s college education. That doesn’t mean, however, that college is out of the question. You have other cost-saving options available.

Student Strategies
Students can follow a variety of strategies to help reduce their expenses prior to entering college and once they’re in college. For example, many college students are able to work at part-time and summer jobs to help subsidize their tuition or for entertainment money. Be aware, however, that money earned by the child prior to college may reduce his or her eligibility for financial aid.

Some colleges offer cooperative education programs where students rotate study with periods of career-related work, allowing them to earn money and credits at the same time. However, it may take more than four years to complete a degree through a cooperative education program. Ask the college admissions office about the specifics of their program.

Depending on a child’s scholastic ability, he or she may be able to earn college credits by taking college courses or Advanced Placement exams while still in high school. First- and second-year college students can also take College Level Examination Program tests for course credit. These options can represent a significant savings over the cost of a course in the classroom. Check with your child’s high school guidance counselor or with the college admissions office for eligibility requirements and program specifics.

Another cost-saving possibility is for your child to attend a Community College for the first year or two, then transfer to a four-year college to complete a degree. This can be a more affordable approach to receiving a degree from a prestigious institution. Also, colleges that are highly competitive for freshman applicants are often less competitive for third-year applicants.

Financial Aid
The traditional sources of financial aid include scholarships, grants, work-study programs and government loans. Your child’s scholastic record, course of study, athletic ability, and choice of college are just a few of the variables that may affect the availability of these options. The Internet can provide information about billions of dollars of scholarship money available each year. There are several very good scholarship search websites; see “For More Information”on page 6 for Internet addresses.

If your family meets certain financial criteria, the federal government has a program of low-interest loans with extended payment terms. Relying too heavily on loans, however, can burden graduates with large debts just when they are working to establish financial independence.

FROM: http://www.metlife.com

This discussion of tax considerations provides only a general overview; tax laws are constantly changing. Consult a tax professional or financial advisor before investing, and review investments regularly. In particular, if you move money from one account to another there may be tax implications. If you are unsure of the implications, always seek professional advice.

Here are just a few examples of tax considerations that could affect college funds:

• Loans. Many families find that their savings is not enough to cover the entire cost of a child’s education. If you take out a qualified student loan, in your name, to pay for your child’s education, the interest on that loan may be deductible as long as the child was your dependent when the loan was received. If a child who is no longer a dependent takes out a loan in their own name, they may be able to deduct the interest. Note that a qualified loan is one used to pay tuition, fees, living expenses, books, supplies, and transportation expenses.The maximum amount of interest deductible on a qualified student loan is $2,500—per return. There are also certain income restrictions. The deduction is phased out if your modified adjusted gross income is in the range of $50,000 to $65,000 for single filers, and $105,000 to $135,000 for joint filers. Consult a tax professional before planning on this deduction, as other restrictions may apply.
• Custodial Accounts. You can transfer assets to a custodial account for your child under the Uniform Gift to Minors Act (UGMA) or the Uniform Transfers to Minors Act (UTMA). Income on assets in these custodial accounts is generally taxed at the child’s rate, although some exceptions may apply. Consult a financial professional for information relating to your specific situation.

Note that putting assets in your child’s name could reduce the amount of financial aid he or she is eligible to receive. It is also important to realize that unlike 529 College Savings Plans, these custodial accounts belong to the child. The account terminates and becomes the child’s property, to do with as he or she chooses, at a specific age (usually 18 or 21) specified by state law.

FROM http://www.metlife.com

The federal government encourages educational savings by providing tax breaks. These include tax credits (i.e., you subtract the credit directly from the amount you pay in taxes) and tax deductions (i.e., you subtract the deduction from your income before calculating the taxes). The government will even allow you to defer paying taxes while your income grows, and, in some cases, pay no taxes on interest and earnings used for education. It may be possible to take advantage of more than one of these tax incentives for saving for college, but the process is sometimes complicated. Check with a tax professional before committing your funds in anticipation of getting these tax breaks.

Hope Scholarship Credit
The Hope Scholarship Credit may help you reduce your annual tax by up to $1,650 per eligible student, depending on how much you spend on tuition. An eligible student can be you, your spouse, or your dependent. The Hope Credit is only available for the first two years of post-secondary education per student. You cannot claim the Hope Scholarship credit if your adjusted gross income is above $55,000 for single filers, or above $110,000 if filing jointly. There are other requirements you must meet to qualify;
see IRS Publication 970, Tax Benefits for Education.

Lifetime Learning Credit (LLC)
You may use the Lifetime Learning Credit to reduce your tax by 20 percent of the first $10,000 you paid for qualified tuition and related expenses for yourself, your spouse, or your dependent(s) for whom you claim an exemption. The income limits are currently the same for as for the Hope Scholarship Credit. Parents with more than one child may claim an LLC for one child and a Hope Credit for a different child in the same year. The two credits, however, may not be claimed in the same year for the same child. You cannot claim the credit if you are married filing a separate return.

Deduction for Qualified Higher Education Expenses
This deduction allows taxpayers to deduct $4,000 of qualified higher education expenses. You cannot deduct higher education expenses on your income tax return if you or anyone else claims a Hope or Lifetime Learning Credit based on those same expenses. The deduction is phased out for joint filers with income between $105,000 and $135,000 and single filers with income between $50,000 and $65,000. Check with a tax professional for the most up-to-date information.

Coverdell Educational Savings Account
You are now able to set up a plan called a Coverdell Education Savings Account (CESA) for the purpose of paying education expenses. The earnings from the account are not taxed and withdrawals from CESAs are tax-free when used to pay for qualified educational expenses. The account may be opened on the day your child is born and contributions are allowed until your beneficiary reaches 18.

Contributions may not exceed $2,000 per child, per year. The amount is per beneficiary, and not per contributor. So if you have three children, you could contribute up to $2,000 for each of them, bringing your total to $6,000 annually. Contributions are phased out for joint filers with income above $220,000, and single filers above $110,000. Contributions are made with after-tax dollars.

The CESA allows you to make withdrawals to pay for elementary, secondary, and college expenses. Neither ordinary income tax, nor the 10 percent penalty for premature withdrawals applies if the distribution is used for tuition, fees, books, and room and board. Currently, you may also claim either a Hope or LLC credit in the same year as the distribution.

FROM http://www.metlife.com

529 plans were authorized by Congress in 1996. They are administered by the states and provide families with tax incentives to encourage saving for college. States implement their 529 plans in various ways, with each having its own conditions, but all 529 plans are exempt from federal income tax. 529 Prepaid Tuition Plans are offered by 19 states. These plans lock in the price of tuition at today’s rates, no matter what the rate actually is when your child enters college. Prepaid tuition plans are operated by state governments. If you decide to invest in a prepaid tuition plan, your college savings will go to the state, either in a lump sum or in monthly installments. The state, in turn, will invest the money to earn the difference between what you’re paying and the projected cost of tuition when your child reaches college age. Accounts are guaranteed by the state government to at least match in-state college tuition increases. Check with your state’s commission on higher education to see if a prepaid tuition plan is available where you live.

Anybody can contribute to a prepaid tuition plan. This is especially good for grandparents, because of the estate planning possibilities. Prepaid tuition plans are exempt from federal income tax, and, in some states, from state and local income taxes.

Prepaid tuition plans are not for everyone. Using this option may jeopardize your chances for state financial aid if you would otherwise qualify. If you’re interested, and a plan is offered in your state, determine:

• Whether the plan covers only the cost of tuition, or room and board, as well;
• If you can apply the proceeds to another state school within your state; and
• How your original deposit will be returned if your child does not attend college or attends a private or out-of-state college.

529 College Savings Plans are offered by 32 states. Unlike prepaid tuition plans, these plans do not lock in tuition rates and make no guarantees. The value of investments in these plans will fluctuate based on the investment vehicles you choose and market conditions; savings may not be enough to cover all college expenses. Most 529 Savings Plans offer a variety of investment options based on the number of years until the funds are needed.

The maximum permitted account balance (per beneficiary) will be specified by the plan you choose and the state in which you live. Some plans have a dollar amount limit — usually $300,000. Limits on others are tied to the projected (future) cost of full-time college tuition for five years. Additionally, most —but not all—will have annual contribution limits.

Contributions may be made by parents or by others (e.g., gifts from grandparents). In 2006, $12,000 per donor for each beneficiary is eligible for the gift tax exclusion. Note that other gift-tax considerations may apply. To determine specific laws and regulations that affect your situation, consult a financial professional. Unlike prepaid tuition plans, the monies from the account may be used at any qualified institution of higher learning within the United States. If your child does not go to college, the money can be used for another family member’s qualified education expenses or you may keep the money and be taxed at your rate plus a 10 percent penalty. Check with your state’s commission on higher education to see if a college savings plan is available where you live. If your state does not have a savings plan, many other states have opened their plans to non-residents. Several private plans have also been developed. A 529 plan locator to determine the plan(s) available in your state is at The College Savings Plan Network.

FROM http://www.metlife.com

Below is an overview of common types of vehicles used to save funds for college. In some cases, you may face complicated tax issues if you plan to pay college expenses with the returns from savings and investments. To realize the full benefit of these instruments, consult with a tax professional before committing your funds.

Savings Accounts

A savings account is a good place to store emergency funds and money for short-term financial goals. Funds are readily accessible and the Federal
Deposit Insurance Corporation (FDIC) generally insures savings accounts up to $100,000. The main drawback is low return. The interest rate paid on a savings account is often less than the rate of inflation, so your money may not grow as fast as the rising price of goods and services, making savings accounts inadequate for college savings. On the other hand, if you need to “park” your money for a while until you establish your investment strategy, a savings account might be a reasonable choice.

Money Market Accounts
Money Market Accounts usually earn slightly higher interest than savings accounts but still allow easy access. Some banks and financial institutions require an initial deposit of $1,000 or more and limit the number of withdrawals or transfers you can make during a given period of time. Money market accounts issued by banks are FDIC insured; those issued by financial institutions are not. To get information about FDIC insurance, including whether or not your bank is insured, go to: www.fdic.gov/consumers/consumer/information/fdiciorn.html.

Certificates of Deposit (CDs)
CDs generally earn more interest than savings accounts with equally little risk, but with less liquidity. Like savings accounts, the FDIC generally insures them up to $100,000. CDs provide higher interest rates; in exchange, you agree to keep your money in the CD for a fixed period, usually three months to five years. There is usually an interest penalty for taking money out before the end of the period.

U.S. Savings Bonds (Series EE, Series I)
You need only go as far as your local bank to invest in Series EE or Series I U.S. Government Savings Bonds. The face value of the bonds range from $50 to $10,000. EE bonds are purchased at half their face value. For example, when you buy a $50 bond, you pay $25. The Treasury Department guarantees that new issues of Series EE Bonds will double in value by 20 years from the issue date. This is referred to as the original maturity date. Series EE Bonds earn interest for 30 years. Bonds purchased after April 2005 earn a fixed rate of return, and interest is compounded semiannually for 30 years. I Bonds are purchased at full face value, and also earn interest for 30 years, compounded semiannually. Both EE and I Bonds are exempt from state and local income tax and have certain tax benefits when used for education expenses.

Growth Stocks
Investments in the stock market have the potential to provide better returns than fixed-rate investments (such as savings accounts and CDs), if you have time to let the money ride the ups and downs of the market. The potential for a higher return comes with a higher degree of risk. This is a long-term approach to investing. The word to look for here is growth. When assessing the potential of a particular stock, it is generally a good idea to focus on long-term appreciation rather than dividends. And remember, what the stock market did in the past is no guarantee of how it will perform in the future.

Growth Mutual Funds
A mutual fund is a pool of money, supplied by investors like you, that is invested in various securities such as stocks, bonds, money market instruments, or a combination of these investments. The total investments (holdings) of a mutual fund are called its portfolio. Every share of the mutual fund represents a proportion of ownership of the fund’s portfolio as well as a proportion of the income those holdings generate. Typically, the investment portfolios of mutual funds have a professional manager or team of managers making day-to-day and minute-by-minute buy and sell decisions.

Investing in mutual funds allows you to participate in the growth potential of the stock market with lower potential risk. Investing in just a few stocks can be risky, but mutual funds can help you diversify your investments, and while not guaranteed, diversification can help balance risk. Also, you can start investing in mutual funds with a relatively small amount of money.

There are many types of mutual funds, and the amount of risk varies widely. The share value of a mutual fund will go up and down as market conditions change and investors may make or lose money. Mutual funds are not FDIC-insured, even when they are sold through a bank.

Note that mutual fund companies are required by law to provide you with a prospectus before you invest. A prospectus is a legal document providing detailed information about the mutual fund’s investment strategy, fee structure, and operations and is available from your registered representative. Carefully consider investment objectives, risks, charges, and expenses before investing. For this and other information about any mutual fund investment, read the prospectus carefully before you invest. Investment return and principal value will fluctuate with changes in market conditions such that shares may be worth more or less than original cost when redeemed. Diversification cannot eliminate the risk of investment losses.

FROM: http://www.metlife.com

You probably started thinking about it when your child was very young. You may even have thought about it before your child was born, perhaps while you were shopping for a bassinet and a teddy bear. After all, it’s one of the major responsibilities you face as a parent: your child’s college education.

Personal growth and expanded horizons are reason enough to send a child to college, but there are more practical considerations, too. College graduates have more jobs to choose from, and they generally make more money than people who have a high school education. That makes a college education very important for your child’s future.

The College Board reports that prices at public colleges have risen 30 percent over the past five years, even after adjusting for inflation. In 2006, average tuition and fees were up over 6 percent at four-year public and four-year private colleges. Increases at two-year colleges were somewhat less, approximately 4 percent.

Consider this: If you have a child who will enter a four-year, in-state public college this year, you can expect the total four-year cost to exceed $58,000. If your other child enrolls in the same school five years later, the estimated costs would be about $74,000. If your children decide to attend private colleges instead, which are more expensive, the total costs for your children will be approximately $125,000 and $160,000, respectively. Note that these are average estimates that do not include incidentals such as spending money and travel.

These figures might seem daunting, but it may not be as insurmountable as it seems. The reality is that the savings needed to send most students to college are below these averages. Student loans, financial aid, scholarships, and grants reduce expenses for many. Students’ earnings, and other sources of income, may also reduce the amount you’ll need to save.

It helps to begin saving early, preferably as soon as your child is born. Like buying a house, the more you save, the less you’ll need to borrow. Save and invest regularly, even if it’s just a small amount from every paycheck. Over time, look for ways to boost your college fund savings. Salary increases, bonuses, and money your child receives as a gift are good opportunities to increase savings contributions.

There are many options for investing money for educational expenses, and some provide tax advantages. This pamphlet overviews several choices: money market and bank savings accounts, government bonds, stocks, and mutual funds, as well as government-sponsored plans designed to help you build your college expense fund.

Once saving becomes part of your budget, money will begin to accumulate. It’s important to take advantage of the financial strategies that will help your savings grow in value. Perhaps the most important thing you can learn about saving is the importance of compounding— given time, compounding makes small investments large. Consider the following hypothetical example:

The week the McMillans had their first child, David, they opened an educational savings account. It wasn’t always easy, but they managed to put $200 away each month until David was 18 and ready to go to college The Rileys’ child, Barbara, was born the same month as David McMillan. Since money was tight for them, they decided to delay opening a college savings account until they were earning more. When Barbara turned 9, they opened the account and were able to contribute $600 a month until she was ready to go to college at age 18.

Both the McMillans and the Rileys invested their educational savings in the same mutual fund. It earned 8 percent compounded annually. The McMillans’ total contribution was $43,200 and the Riley’s total contribution was $64,800. Which family do you think had the larger college fund?

You’ve probably guessed the answer. The McMillans had the larger college fund at $96,657—they accumulated over $53,450 in compound interest on their investment of $43,200. The Rileys had nearly as much—their fund was worth $95,087—but they had to invest $64,800 to do it. As you can see, time is a critical component to make investments grow. It’s not just how much money you save that counts, it’s also how much time you have for that money to work for you. You need to start saving as early as possible.

Note that these are theoretical examples presented to illustrate the power of compounding; they do not take into account taxes, account fees, or inflation. Specific interest rates or conditions used in the examples may not be attainable or desirable.

It’s true—college is expensive. But there’s a lot of help available: loans, grants, and tax breaks that can significantly lower the bill. Bear in mind, though, nothing can replace a carefully planned savings and investment strategy, and the earlier you start the more likely it is you’ll reach your goal. Given how important a college education is to your child’s future, today is the best time to begin.

FROM: http://www.metlife.com

Big tuitions are only the start of college costs. Here’s how to get a handle on all the other little expenses that can add up to a big bill at the end of the semester.

By Gerri Willis, CNN

July 26 2007: 2:48 PM EDT

NEW YORK (CNNMoney.com) — You’ve spent years pinching pennies to pay for Junior’s college tuition. But now that he’s heading off to campus, you’re about to be hit with some other bills. You may expect to pay for textbooks, but watch out for the pizza bill and bar tab. Here’s what you can do to cut these college costs.

1: Cut textbook costs

Students are estimated to spend between $700 and $1000 annually on textbooks, according to an Advisory Committee on Student Financial Assistance.

But students don’t have to shoulder all that cost. Check out abebooks.com, an online book site where you can get used and international books below bookstore prices.

Students will also want to check out eBay’s (Charts, Fortune 500) half.com orCheapesttextbooks.com to do a bit of price comparison. Besides these on-line sites, more help may be on the way.

Some states are cracking down on overpriced books at campus bookstores. Some are waiving sales tax. Others are separating out CD-ROMs from textbook orders.

2: Get the discounts

College-age students spend almost $28 billion a year on food, clothing and entertainment according to Alloy College Explorer, a college marketing research program run by Harris Interactive. But don’t despair, there are some deals and discounts out there specifically designed for college students.

Check out studentadvantage.com. Here you’ll be able to buy a student advantage card that will give you discounts with Amtrak, Greyhound or Target (Charts, Fortune 500). And here are a few sites that will outline what other discounts students can get, from movies and international travel to computer software. Check out fatcampus.com.

3: Keep track of debts

With nights on the town, dinners out and financially strapped college kids get together, it can be a recipe for disaster figuring out the final tab. But there are some online budgeting tools to keep track of who owes what. Buxfer.com is an easy way to keep track of individual or group expenses.

You can then set up groups to divide expenses evenly or track your other monthly budget expenses. Billmonk.com is another free site that lets you track who’s been borrowing your books or CDs. It also keeps track of who owes you money, and who you need to settle debts with.

4: Protect your biggest asset

A full-time student may be covered in the family’s health plan until he or she graduates from college, but frequently, the student health service center doesn’t accept outside insurance.

Find out if your insurance will be accepted by the campus health center before your kid heads to class. Colleges may charge you health clinic fees that can ranges from $1,000 to nearly $2,000 according to Jim Boyle of College Parents of America.

You can also check out student health insurance policies, which can be as cheap as $20 a month. Go to Stuhealth.com to see some options.

Plus, if your child is going to be living in a dorm or in off-campus housing, you’ll want to look into insurance for all their stuff - from the TiVo to the laptop.

College cost reduction bill introduced

Check out renters insurance. Some colleges may not tell you to buy renters insurance, because they don’t want to advertise that there could be theft or damage to property on their campus.

You may be able to get a deal if you sign up for renters insurance through the same company you have your own homeowner’s policy with.

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