Surely, if you're a concerned parent, you must have given thought to the $200,000+ estimated cost of a four-year private college education. Parents of a child born in 1999 can expect to pay $100,000 for a degree at a public school, $200,000 for a degree at a private school, and $300,000 at an Ivy League school (this from figures published by Nationwide Financial).

Where will that kind of money come from?

But why should your child be deprived of a college education?

It's not likely he or she will qualify for any federal or state grants. Maybe - MAYBE! some loans. But not much.

Is there a way out? Will Uncle Sam help?

The answer is YES.

Too often, dentists wait too long to begin planning. It seems no matter how much we preach, the very people (i.e., young dentists) who would benefit the most from early planning are the least likely to do it.

But, if one were smart, what would he/she do?

There is an overlooked law on the books which allows parents, grandparents, uncles, aunts, friends, etc., to place money in a tax-deferred account for the educational benefit of another person. The money grows tax-deferred until it is spent and then it is taxed at the rate appropriate to the recipient.

Other advantages are:

	No age limits
	No income limits
	Owner retains control of funds
	Funds invested are removed from estate of donor (with special provisions)
	Substantial funds can be invested early-up to $150,000
	Contributions qualify for gift tax exemption (up to $50,000)
	Donor can reclaim money with a small penalty
	Funds can be used for any educational expense

This is an enormous opportunity that is not being taken advantage of by enough people.

For example, if you could invest $25,000 in a qualified educational fund at age 2, and let it grow tax-deferred until age 18 (16 years) at 9 percent per year, you would have about $100,000 at age 18. And, you've had the benefit of tax-deferred compounding.

The details of the plans (called Section 529) are rather complex and the options are multiple. Each state has its own plan-some being better than others. Some states allow non-residents to participate-and these are among the more attractive plans. The investment features of these plans can vary considerably, but one common consideration is an asset allocation approach based on the age of the beneficiary. A mixture of stocks and bonds progressively becoming more conservative as college age approaches. The exact details go far beyond the scope of this article but, for anyone truly interested in funding their child's education, it's an opportunity not to be overlooked.

There are other options for saving for college (e.g., Educational IRAs, Pre-paid Tuition Plans, State-Sponsored College Savings Plans and just plain saving and investing). But when you factor everything in, the Section 529 Plan will probably look most attractive, provided you're fortunate enough to be able to fund it early and properly.

Published in NJDA / Volume 71/Number 4.