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Expanding College Savings in Texas

Welcome to our Expanding College Savings web page! Research has shown for years that students with a college savings account are much more likely to attend and graduate from college than students without a savings account. That is why it is important for Texas families to save for their child's post-secondary education! Our new college savings guide and the references and resources below are designed to help Texas families navigate through the substantial amount of information and financial products available and to provide resources to help decide which savings option works best for them. We want to encourage YOU to take advantage of this information and start saving for your child’s future college dreams today!

SAVING FOR COLLEGE: THE WHY, WHEN, AND HOW- A Guide of College Savings Products for Texans

RAISE Texas would like to thank Bank of America for their generous financial support and continued guidance in facilitating savings opportunities and increasing awareness of the importance of savings for all Texans. We are proud to partner with Bank of America to provide this guide on college savings options to encourage Texas families to kick start college savings today!

Why Save -- References and Resources

Employment Projections (Source: Bureau of Labor Statistics, Current Population Survey.)

Income of Young Adults (Source: U.S. Department of Education, National Center for Education Statistics. (2012). The Condition of Education 2012 (NCES 2012–045), Indicator 49 and Table A-49- 1.)

"Education Pays 2010" (Source: Economic Policy Institute: The College Board. 2010. “Education Pays 2010”. Accessed June 2013.)

Center for Social Development. Zhan, M., & Sherraden, M. 2011. “Assets and liabilities, educational expectations, and children’s college degree attainment”. Children and Youth Services Review 33(6), 846- 854.

Federal Student Aid 

FinAid! The SmartStudent Guide to Financial Aid: Account Ownership: In Whose Name to Save?  

TEXAS Grant

When to Save - References and Resources

FINRA Savings Calculator

FINRA College Savings Calculator

Calculators and 529 Tools

The College Board's Net Price Calculator

Investor.gov's Compound Interest Calculator

How to Save -- References and Resources

Paying for College (Consumer Financial Protectioin Bureau's step by step process)

College Savings Plan Comparison Tool: Texas College Savings Plan. 2013. “Texas College Savings Plan Description and Savings Trust Agreement”. Accessed June 5 2013.

State of Washington 529 prepaid plan

Utah Educational Savings Program. 2013. “Program Description”. Accessed June 6 2013.

Colorado Department of Higher Education. ©(2013). “Paying For College.” In Money 101. 

Research and Compare 529 Programs at Savingforcollege.com

Compare 529 Plans through College Savings Plans Network

IRS document: IRA Accounts

IRS document: Educational Savings

Merrill Edge. 2013. “Compare College Investment Products”. Accessed June 5 2013

U.S. Department of the Treasury Bureau of the Public Debt: Using Savings Bonds for Education  

TreauryDirect: Education Planning (Savings Bond Education Tax Exclusion)  

Texas Tuition Promise Fund

Texas College Savings Plan 

Texas Match the Promise Foundation

Sample List of Coverdell ESA Providers

Federal Student Aid Website 

College Access and Financial Aid Resources

College for All Texans (Texas Higher Education Coordinating Board)

KnowHow2Go  

FinAid! The SmartStudent Guide to Financial Aid

The College Board

Federal Student Aid

firstgenerationstudent

Information on Educational Savings Options

 

Texas Tuition Promise Fund

Texas College Savings Plan

Other States' 529 Plans

Coverdell ESA

US Savings Bonds

Who can open the account?

Adult: Texas resident, or child of Texas resident

Adult

Adult; Resident of the state if prepaid plan

Adult

Adult

What age can the account beneficiary be?

No age limit

No age limit

No age limit

Under 18 years old, no age limit if special needs

No age limit

Where can the savings product be established?

Online

Online

Online

Bank, Brokerage firm

Online

What is the cost to open the account?

$25

$25

Varies

Varies

Cost of savings bond

What is the contribution limit?

$370,000 per child

$370,000 per child

Varies

$2,000 per year

$10,000 per bond

Can the funds be transferred to another beneficiary?

Can be transferred to another beneficiary (family member)

Can be transferred to another beneficiary (family member)

Depends on the Program

Can be transferred to another beneficiary (family member)

Can be transferred to another beneficiary (family member)

When to pay federal taxes on the funds?

Earnings in account accrue federal income tax free, contributions not tax deductible

Earnings in account accrue federal income tax free, contributions not tax deductible

Earnings in account accrue federal income tax free, contributions not tax deductible; If resident of a state where there is state income tax, a state income tax deductible may apply

Earnings in account accrue federal income tax free, contributions not tax deductible

Interest accrued above qualified education expenses may be subject to federal income tax

When does the gift tax come into effect?

Contributions over $13,000 (filing individually), $26,000 (married couples)

Contributions over $14,000 (filing individually), $28,000 (married couples)/annually

Contributions over $13,000 (filing individually), $26,000 (married couples) / annually

N/A; contributions up to $2,000 allowed

N/A

When can the funds be distributed without penalty?

For qualified education expenses, when tuition is due

For qualified education expenses, when tuition is due

Varies

Any time of year

At the time of maturity

What age must the funds be used

Within 10 years of the Beneficiary’s projected high school graduation

See plan agreement for rules and limitations

Varies

30 years old

None

What expenses can the account be used for?

Tuition, fees

Tuition, fees

Varies, depends on program

Tuition, fees, room, board, books, supplies

Depends on bond type purchased

What levels of education can the account be used for?

Post-secondary; undergraduate

Post-secondary; undergraduate

Post-secondary, depends on program

Elementary, secondary, post-secondary

Post-secondary

How does it affect FAFSA?

Account owner's assets

Account owner's assets

Account owner's assets

Account owner's assets

Account owner's assets

How does it affect public assistance programs?

See Texas Works Handbook for information how it affects public assistance programs.

See Texas Works Handbook for information how it affects public assistance programs.

See Texas Works Handbook for information how it affects public assistance programs.

See Texas Works Handbook for information how it affects public assistance programs.

See Texas Works Handbook for information how it affects public assistance programs.

What is the enrollment requirement in order for account funds to be “qualified” expenses?

Half-time enrollment

Half-time enrollment

Half-time enrollment

Half-time enrollment

Must be enrolled at a qualified post-secondary institution

What are the withdrawal penalties for unqualified expenses?

Any applicable state income tax plus additional 10% federal tax

Any applicable state income tax plus additional 10% federal tax

Any applicable state income tax plus additional 10% federal tax

Excess contributions over $2,000 per year is subject to a 6% excise tax; Remaining contributions past age 30 are also subject to 10% federal tax

May be subject to income taxes

What if there is a scholarship?

Assets may be withdrawn to the amount of the scholarship without penalty

Assets may be withdrawn to the amount of the scholarship without penalty

Assets may be withdrawn to the amount of the scholarship without penalty; may depend on state

Assets may be withdrawn to the amount of the scholarship without penalty

Check with financial advisor


College Savings Activities to Raise Awareness and Opportunities to Save for College

Child Support for College (CS4C)

Smarter Texas Financial Education Program

Save 'n SMILE Family Video Contest

Information on General Savings Options

 

Regular Savings Account at Bank or Credit Union

Money Market Account

Certificate of Deposit

Who can open the account?

Adult or child

Adult

Adult

What age can the account beneficiary be?

No age limit

No age limit

No age limit

Where can the savings product be established?

Bank or Credit Union

Bank or Credit Union

Bank or Credit Union

What is the cost to open the account?

Varies

Varies

Varies

What is the contribution limit?

None, but FDIC insured until $250,000

None, but FDIC insured until $250,000

None, but FDIC insured until $250,000

Can the funds be transferred to another beneficiary?

Can be transferred to another beneficiary (family member)

Can be transferred to another beneficiary (family member)

Can be transferred to another beneficiary (family member)

When to pay federal taxes on the funds?

Taxable interest paid annually

Taxable interest paid annually

Taxable interest paid annually

When does the gift tax come into effect?

See the IRS Gift Tax Information to see if it applies.

See the IRS Gift Tax Information to see if it applies.

See the IRS Gift Tax Information to see if it applies.

When can the funds be distributed without penalty?

Varies by account. Check for specific withdrawal regulations with your financial institution.

Anytime but penalties will occur if the balance falls below the minimum amount or if you withdraw more often than the stated monthly amount

After the term or time period ends.

What expenses can the account be used for?

Tuition, fees, books, supplies, room, board

Tuition, fees, books, supplies, room, board

Tuition, fees, books, supplies, room, board

What levels of education can the account be used for?

All levels of education

All levels of education

All levels of education

How does it affect FAFSA?

Account owner’s asset or can be parent asset

Account owner’s asset or can be parent asset

Account owner’s asset or can be parent asset

How does it affect public assistance programs?

See Texas Works Handbook for information how it affects public assistance programs.

See Texas Works Handbook for information how it affects public assistance programs.

See Texas Works Handbook for information how it affects public assistance programs.

What is the enrollment requirement in order for account funds to be “qualified” expenses?

N/A

N/A

N/A

What are the withdrawal penalties for unqualified expenses?

Account can be used for unqualified education expenses as well as qualified

 

Account can be used for qualified and unqualified expenses, but there might be limits on the number of withdrawals allowed.

Account can be used for qualified and unqualified expenses, as long as the money is not withdrawn before the end of the specified time period.

What if there is a scholarship?

None, funds can be used at any time

None, funds can be used at any time

None, funds can be used at any time


Other References and Resources

Higher Education and Training Resources from MyMoney.gov

Find an Individual Development Account Program in your area

San Francisco's Kindergarten to College Program
 
CFED: Children's Savings Accounts

Savings and Public Assistance Programs

82(R) Session HB 3708- Includes the Exclusion of Assets in Prepaid Tuition Programs and Higher Education Savings Plans

Texas Health and Human Services Texas Works Handbook

Taxes

IRS: Topic 403- Interest Received

IRS: Information on how to report Interest Income

IRS: Gift Tax

This guide offers a general overview of the college savings products that may be available, but is not intended to replace financial advice. Specific product details may change over time, or may not always be offered. Please consult the financial institution, savings program, or a financial professional (such as a financial advisor) directly to ask any questions and to make sure the product fits your goals.

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