In todays highly competitive college admissions process, families must never lose sight of the fact that nothing is more important to parent or child than the students acceptance to college. Your second priority is how to pay for it.

Planning for college can begin as early as birth, and for that matter, even before birth. Financial planning in the early years can make all the difference in the world when it comes time to have to cough up all that cash! The following are some of the best ways to save for college:

Custodial Accounts: With Uniform Gift or Uniform Transfer to Minors Act Accounts (UGMA or UTMA), parents, grandparents, etc. can each contribute up to $11,000 per student per year (2005). This money can be used for college or any other purpose. Although the money remains in the students name, the custodian, usually a parent, has absolute control over the account i.e. stocks, bonds, mutual funds, savings, etc. UGMA accounts accept cash only. UTMA accounts accept cash and property.

The Downside: UGMA and UTMA accounts are irrevocable gifts that are considered student assets. Since students have no asset protection allowance, these assets are assessed at either 25% per year at schools that employ the institutional methodology, (Ivy League and high profile private colleges), or 35% per year at all the rest that employ the federal methodology! Therefore, this option must be used with extreme caution!

Education IRAs a/k/a EIRAs: Single parents with an adjusted gross income (AGI) of up to $110,000, and joint filers with AGIs up to $190,000, can contribute up to $2,000 annually to an EIRA. Earnings accumulate tax-free and can be withdrawn tax-free without penalty to pay for a private elementary, secondary, or college education.

The Downside: With the current limit of $2,000 (2005), fees can eat up much of the gains in the early years when balances are small. Contributions to EIRAs are not tax deductible and all colleges consider EIRAs student assets and apply the 25% or 35% assessment when calculating financial aid. Whats even worse is what happens when distributions are made from these accounts. Financial aid is automatically reduced dollar for dollar, because in addition to being an asset, the funds have now become a resource! When these funds are legally repositioned outside of the financial aid formulas, then none of the money is assessed!

State Plans a/k/a 529 Plans: Anyone can open a 529 Plan in his or her own name and designate a student as the beneficiary. Up to $50,000 ($100,000 jointly) may be contributed over five years to a maximum of $246,000. Funds grow tax-free and withdrawals since 2002 have been tax-free as well.

Downside: Monies contributed are not tax deductible, and there is little or no control over how the funds are invested. Also, there is a 10% penalty for withdrawals not used for college, and 529 Plans can actually decrease chances for a large grant or scholarship and thats not all. When there are distributions from these accounts, financial aid is automatically reduced dollar for dollar! As with EIRAs, having the funds legally repositioned elsewhere, will result in no assessment whatsoever!

Retirement Plans: An IRA, HR10 (Keogh), Pension, SEP, 401(k), 403(b), 457 or any other qualified retirement plan should also be considered when saving for college. Such plans are not regarded as assets and are outside of the financial aid formulas. While the account value is not considered an asset, the annual contribution made is added back to the AGI for an income assessment! The big print giveth, but the small print taketh away!

Non-Qualified Savings Plans: These are accounts strictly set up to provide funds to be used to pay for the Expected Family Contribution (EFC) or any unanticipated college costs. Families need to set up these accounts as early in the students life as possible, so there will be adequate money to pay such costs when the time comes.

Remember, by the time students enter high school, consideration should be given to reducing high risk investments. Never gamble with money thats earmarked for education! And, never lose sight of the fact that all monies saved for college in the early years will not serve their purpose unless the student prepares for and successfully completes the admissions process.

This is one of a series of articles by college admissions and financial aid expert, Reecy Aresty, based on his book, Getting Into College And Paying For It! For further information or to contact him, please visit www.thecollegebook.com.

Reecy Aresty

For almost three decades, financial advisor Reecy Aresty, has helped thousands of families protect their assets, increase their wealth and reduce their taxes. During the 1980’s, he mastered the complexities of college admissions & financial aid, and by the end of the decade, he was already saving his clients thousands of dollars on a college education!

In 1986, made possible by a generous gift from the Aresty family, the Wharton School at the University of Pennsylvania established the Aresty Institute of Executive Education. So began the Aresty family legacy; a dedication to the pursuit of knowledge through higher education for all.

In 1999, Reecy founded College Assistance, Inc., dedicated to helping parents provide their children with the best possible education for less than they ever imagined! He is the author of the groundbreaking new book, “Getting Into College And Paying For It.” Filled with trade secrets, insider information and innovative money saving strategies, it is guaranteed to legally cut the costs of a college education!

Reecy’s SPECIAL REPORT on page 126 reveals the trappings of the Tuition And Fees Deduction which Robin-hoodwinks middle and lower income families by taking from them and giving to the rich! Reecy alerts families to what even many accountants have missed - how those who chose the Deduction in 2002, 2003 and/or 2004, who qualified for either of the Education Credits, are guaranteed refunds from the IRS! Knowledge of this prevented countless families from making the same mistake, and Reecy has been instrumental in recovering tens of thousands in overpaid taxes!

In 2004 alone, overall, he saved families hundreds of thousands of dollars! His clients receive a free financial evaluation that reveals how they can legally eliminate or reduce costly assessments from the schools and the federal government. This significantly lowers their Expected Family Contribution, the minimum amount each family must pay at any college (for each student), and maximizes their eligibility for financial aid. He even helps families negotiate with the schools to obtain the absolute best possible financial aid package!

Reecy Aresty has become a major factor in obtaining affordable, quality educations for America’s students. In doing so, he has restored the faith people used to have in one another by proving that there are still people who care, people who can be trusted, and people who actually do what they promise – and get results.