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The Effect of Alternative Savings Approaches on College Aid

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Publication Date: August 2009

Publisher(s): Tax Policy Center

Author(s): Elaine Maag

Special Collection: John D. and Catherine T. MacArthur Foundation

Topic: Education (Education financing, facilities, and equipment)

Keywords: Adolescents and Youth Development; Children; Economic inequality; Families/Parenting

Type: Report


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.