On March 11, Â
Donâ€™t let these developments discourage you from saving for college. The best savings vehicle is a state-sponsored 529 plan. The money grows tax-free and can be withdrawn federally tax-free if the money is used for qualified high education expenses such as tuition, room and board and books. Some states, such as Â
Savings held in 529 plans barely have a minimal effect on financial aid eligibility, according to Mark Kantrowitz, founder of the informational college website finaid.org. Â
Ââ€œRegardless of how much the parents earn, amounts in retirement funds, the net home equity, and small businesses owned and controlled by the family are ignored,â€ Kantrowitz explains.
â€œOf the remaining assets, the first $45,000 to $50,000 is sheltered, depending on the age of the older parent. The remaining assets are assessed on a bracketed scale, with the top bracket at 5.64 percent,â€ he says. â€œSo if you save $10,000, the worst case impact is a $564 reduction in aid, leaving you with $9,436 more than you would have had otherwise.â€ Â