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College Costs Continue to Rise

That doesn't mean college is out of the question. Opportunities are plentiful for financial assistance.

Savings Plans, Loans, Scholarships and Annuity Payouts Can Be Options.

You're probably no longer shocked when you hear that college costs are on the rise. With that in mind, it's understandable that paying for college is top-of-mind among families.

According to U.S. News in 2014-2015 (data reported by 728 ranked universities in the annual survey):

  • Private school tuition and fees averaged $31,380, up 3 percent from the previous year.

  • Public university tuition averaged $19,867 for out-of-state, up 2.8 percent, and $8,709 for residents, up 2.7 percent.

  • Also rising is average indebtedness. Nearly 70 percent of 2013 graduates had institutional, state or federal loans, graduating with an average debt of $27,667. That's about $500 more than borrowers in the class of 2012 incurred. 

While these statistics are frightening, they should not deter families from sending children to college because of ever-increasing costs. Options still exist.

  • 529 savings plans. 529 plans, available in all states, allow your savings to grow tax-free, and the earnings escape federal tax completely, if the withdrawals are used for qualified college expenses, including tuition, fees, and room and board. Many states offer residents a tax deduction or other tax breaks.
  • Coverdell Education Savings plans. This plan is similar to 529s in that the money in the account grows tax-deferred and is not taxed if you use it for qualified education expenses. Coverdells expand the definition of “qualified” to include tuition at private elementary schools and high schools. If you withdraw the money for nonqualified expenses, you pay tax and a 10% penalty on earnings.
  • Prepaid tuition plans. These plans, typically available only to state residents, allow you to lock in tuition at public colleges years in advance. They offer the same tax benefits as 529 savings plans. Currently, 20 states offer the plans.
  • A Roth IRA can help fund your retirement and your child’s college education, but only if you start early enough. The money in a Roth grows tax-free, and you avoid tax on withdrawals that don’t exceed your contributions. You also avoid a 10% early-withdrawal penalty on earnings, if you use the money for educational expenses.
  • Custodial accounts, known as UGMAs (Uniform Gifts to Minors Act) and UTMAs (Uniform Transfers to Minors Act), let you put money or other assets in trust for a minor child. As trustee, you manage the account until the child reaches 18 or 21, depending on your state. At that age, the child owns the account and can use the money for whatever he or she chooses, hopefully college tuition. A parent can invest as much as desired. However, it's recommended to cap individual annual contributions at $13,000 to avoid gift tax. 

Other options include scholarships, grants and financial assistance from organizations such as AmeriCorps or the Peace Corp, in exchange for a service commitment, and of course, student loans.


At J.G. Wentworth, we can help as well. For example, if you received an annuity as a settlement, you may be able to sell the rights to your payments for cash. Those payments can cover tuition. You can talk with us to learn about payout details or if this is the right move for you. First we recommend that you read our annuity FAQ. Also:

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