The Effect of Alternative Savings Approaches on College Aid

Abstract:

To pay for college, many low- and moderate-income students and their families rely on financial aid and savings. But how students and families save?and in whose name?affects both the tax consequences and the impact of savings on financial aid. Not saving in a tax-preferred account can raise the out-of-pocket costs of college by thousands of dollars. Alternately, saving for college can result in tax penalties if families do not use tax-preferred savings for education.