Rushville Republican

Business

January 28, 2013

Help your children avoid student debt burden

RUSHVILLE — It’s not so easy being a college kid these days. The job market for recent graduates has been shaky while, at the same time, students are leaving school with more debt than ever before. If you have children who will someday be attending college, should you be worried?

You might indeed have cause for concern. Americans now owe more on student loans than on credit cards, according to the Federal Bank of New York, the U.S. Department of Education and other sources. For the college class of 2011, the most recent year for which figures are available, the average student loan debt was about $26,500, according to the Institute for College Access and Success’s Project on Student Debt.

This type of debt load, coupled with the struggles to find a well-paying job commensurate with their education, is causing many recent graduates to get off on the wrong foot in terms of developing savings and investment strategies that could help them throughout their lives.

So, what can you do?

If you want to help your kids pay for college, you may want to consider a 529 plan. When you invest in a 529 plan, all withdrawals will be free from federal income taxes, as long as the money is used for qualified college expenses. (However, non-qualified withdrawals may be subject to ordinary income tax plus a 10% penalty on the earnings portion.) Contribution limits are high, and, contributions may be eligible for a tax deduction or credit for residents in certain states.

A 529 plan, while valuable, is not the only college savings vehicle available. You may also want to consider a Coverdell Education Savings Account, which, like a 529 plan, can generate tax-free earnings if the money is used for higher education expenses. However, a Coverdell account’s contribution limits are much lower than those of a 529 plan. You could also establish a custodial account, known as an UGMA or UTMA, which offers some tax benefits and no contribution limits.

Nonetheless, while these vehicles may help you save and invest for college, they may also divert resources that you might have used for other financial goals such as a comfortable retirement. Of course, it’s not an “either-or” situation; there’s nothing stopping you from contributing to a 529 plan, Coverdell account or custodial account along with your 401(k) and IRA.

Clearly, though, it will take discipline and perseverance on your part to save and invest for both your children’s education and your own retirement. Like everyone else, you don’t have unlimited resources. But you do have another ally - time. The earlier you begin investing for education and retirement, the greater your chances of achieving your goals in these areas. And by understanding how your goals interact, you can work to make sure you don’t inadvertently derail one when saving for another.

Avoiding the student loan “debt trap” while still making progress toward your retirement savings will require creative thinking - and both you and your children may have to make some sacrifices along the way. But the ultimate goals, a college degree that isn’t one big IOU and a comfortable retirement, are worth the effort.

 

1
Text Only
Business
  • U.S. jobless aid applications fell WASHINGTON (AP) - Fewer people sought U.S. unemployment benefits last week, as jobless claims remain at relatively low levels that point toward stronger economic growth.Weekly applications for unemployment aid fell 14,000 to a seasonally adjusted 289

    August 8, 2014

  • Choose carefully when remodeling to boost home value With summer in full swing, home remodeling is top of mind for many homeowners. And by all the evidence, the return on home improvement investments has never been better. For most people, a home is their biggest investment. A home remodeling or replac

    August 8, 2014

  • bus-rv080114-citizens pic Citizens State Bank expands local team Citizens State Bank has announced Samantha Coon as a new teller who will serve the Rush County market. She will be working at our Rushville branch located at 1802 N. Main St., Rushville. She brings a tremendous amount of team building and customer se

    August 1, 2014 1 Photo

  • Edward Jones Moves Up on the FORTUNE 500 List RUSHVILLE - Financial services firm Edward Jones moves up on the annual FORTUNE 500 list, as published by FORTUNE magazine, in its second appearance in two years, according to the following Rushville area Edward Jones financial advisors: * Brian D Hu

    June 13, 2014

  • bus-rv061314-fussner release pic Fussner completes 2nd year at Institute for Organization Management WASHINGTON, D.C.-- Institute for Organization Management, the professional development program of the U.S. Chamber of Commerce Foundation, is pleased to announce that Sandy Fussner, Executive Director of the Rush County Chamber of Commerce, has recen

    June 13, 2014 1 Photo

  • U.S. businesses boost April stockpiles 0.6 percent WASHINGTON (AP) -- U.S. businesses increased their stockpiles in April by the largest amount in six months, signaling business optimism that future demand will keep rising. Business inventories rose 0.6 percent after a 0.4 percent March gain, the Com

    June 13, 2014

  • Farm Credit schedules ribbon cutting RUSHVILLE - Farm Credit Mid-America, an agriculture lending cooperative serving farmers, rural residents and agribusinesses throughout Indiana, Ohio, Kentucky and Tennessee, will hold a ribbon cutting ceremony on May 29 for their new office in Rushvi

    May 16, 2014

  • Purdue NExT online learning program launches global website, now open to individuals, businesses, industry WEST LAFAYETTE -- Purdue NExT, an online interactive learning program, has launched its global website, offering 25 new classes. Purdue NExT is an outgrowth of PurdueHUB-U, an online education initiative announced in 2012. It is based on HUBzero, a p

    April 25, 2014

  • Student business competition announces finalists, Demo Day presentations WEST LAFAYETTE - Three Purdue University student-based startups have advanced to the final round of the Boiler Mini-Accelerator Competition or "Boiler," where they will compete for nearly $10,000 in funding. The Boiler, a student-run business competi

    March 28, 2014

  • Congressman Messer honors training program Congressman Luke Messer has made it a matter of Congressional Record that he strongly supports the Manufacturing Matters fast track training program in Rush, Wayne, and Fayette counties. In the Congressional Record dated Feb. 25, 2014, he congratulat

    March 14, 2014