More Than Finances

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Deciding On A Graduate School

When you are thinking about graduate school, you should always envision your long-term plan. You should have a goal set before graduate school to ensure that you stay focused on achieving excellence throughout the program. Too many students lose focus during graduate school or become unsure of what they want to do with their degree. Because you are making such a large investment by attending graduate school, it is imperative that you consider these things before you attend:

Your Financial Situation

Before you attend graduate school, take a look at your financial situation. See what type of program you can afford to attend. Consider how attending graduate school will impact your budget in the next 10 or 20 years. You want to make sure you have carefully weighed the consequences that you believe attending graduate school will have in your life.

Cost of Tuition

If is important that you also understand the cost of tuition for a graduate school program. You should know how much a graduate school program so that you can see whether it will be affordable for you. Some graduate school programs cost anywhere from $40,000 to $60,000 a year. You should make sure that you can afford this high cost. If you will be taking out loans to pay for the cost of this education, then you should make sure that you will be able to repay the loans with a job after graduation.

You should also make sure that you will have good employment prospects to pay back these funds. It is important for you to know that you will be employed so that you will not be stuck with high loans to repay upon graduation. Whether you want to be a professor or do research for a faculty department, make sure that your goals are clearly outlined so that you can begin working immediately upon graduation.

Likelihood of Employment After Graduation

In addition to tuition of the school, you should also look at the employment statistics of a graduation school. Make sure that the grad school has a reputation for putting students into the career fields they aspire to enter. Make sure that students are able to find good careers after they graduate. If you want to be a professor, then make sure you know how many students are able to enter the teaching field after graduation.

By carefully considering the information of different graduate school programs, you can make the decision that is right for you. You can also visit to weigh the pros and cons of programs.

Post by Amanda


529 Plans – A Powerful College Savings Tool And More

In the previous post, we talked about using Coverdell ESA’s as a method of saving for college. While this is a useful tool, there’s another tool that may be better – the 529 Plan. What are some of the similarities and differences between the two?

Tax Treatment

As with ESAs, contributions to a 529 Plan are not deductible for federal tax purposes. However, earnings are tax-deferred. And if used for qualified education expenses, accumulated funds can be withdrawn tax free. And as a custodial account, UTMA accounts let you save in a child’s name, tax free!

One feature that some 529 Plans have which all ESAs don’t are state tax benefits. Some state plans offer an upfront deduction on contributions, while others make withdrawals exempt from state taxes in addition to the federal tax exemption.

Contribution Limits And Requirements

Each state has their own 529 Plan, but investment in a state’s plan doesn’t restrict you to using the funds for a school in that state. You can live in Texas, invest in a California plan, and send your beneficiary to college in New York.

With the inflation rate for college rising faster than the normal inflation rate, some people want to save more than the $2,000 annual limit for ESA’s. The 529 Plan has a much larger limit. You can contribute up to the limit set by the state offering the plan, which is usually over $300,000 per beneficiary.

And unlike ESA’s, there are no income limitations for those who want to contribute to a 529 Plan.

Qualified Withdrawals

Unlike ESAs, in which beneficiaries must use the assets by the time they reach age 30, there is no age limit on the use of 529 Plan assets.

But although ESA funds can be used for elementary, secondary, and post secondary school expenses, funds in a 529 Plan can only be used at a post secondary school.

And like the ESA, earnings in a 529 Plan that aren’t used for qualified expenses will be subject to income tax and a 10% penalty.

Available Investments

While ESAs are more flexible with the type of investments you can choose, 529 Plans are more restrictive. Funds can only be invested in portfolios established by the plan.

Each portfolio will have different investment objectives, but there will usually be an option for a portfolio whose asset allocation becomes more conservative as the beneficiary reaches college age. In addition to this, you’re allowed to change the investment strategy once a year.

Additional Benefits

Not only is the 529 Plan a great savings tool for college – another benefit is that it can be used to reduce the size of your estate. Contributions of up to $13,000 per year can be made to the 529 Plan without paying a gift tax. Once completed, this money is removed from your estate.

And since you can treat a contribution as being made over a five-year period for gift tax purposes, you can contribute a lump sum of $65,000 in the first year and still avoid gift tax. With this method, the money and its future appreciation will be removed from your estate faster.

Closing Thoughts

So because of the larger contribution limits, state tax benefits, and ability to remove assets from your estate, I think the 529 Plan has the advantage over the Coverdell ESA.

What do you think? Do you have a 529 Plan? Do you like them better than Coverdell ESA’s?

This post was included in the Carnival of Personal Finance during the week of July 6, 2010. Check out My Journey To Millions’ for a variety of great articles!


Coverdell Education Savings Accounts – What Are They And How Do They Work?

Most parents hope to send their kids to college one day. But with rising costs, they look for different ways of saving to afford it. One method is through the Coverdell Education Savings Account. What is it? How does it work? What are some of its benefits and drawbacks?
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