The cost for college is not going down, so what do parents do to prepare?

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Monday, August 05, 2019
News 12 at 6 O’Clock/NBC at 7

Illinois lawmakers say they will investigate the use of a guardianship loophole that wealthy families took advantage of to qualify their children for college financial aid. (MGN)

AUGUSTA, GA (WRDW/WAGT) -- The average cost for in-state tuition is nearly $10,000 a year.

Many families don't have tens of thousands of dollars to send their child to college, but what they may have is time -- and time can pay off when it comes to investing into education.

Whether your little one is just starting first grade or entering their senior year of high school, it's not too early or too late to come up with a college savings plan.

Tara Wood’s eldest child started college in the fall.

"We will help them how we can, but we made it clear she's going to have to have a job,” Wood said.

So how can a parent afford to send their child to school without going broke?

That’s where Will Rogers comes in. He’s a financial wizard and a father. He says planning for college is as easy as 1, 2, 3, and 4.

"Rather than plastic memories that will be stuff to be thrown away, whatever they're going to spend on plastic stuff – toys -- spend just as much for their education and their independence and make a matching donation to their 529 account," Rogers said.

A 529 allows parents to set up an account where money can grow tax-free. In Georgia, parents can get up to $2,000 tax deduction on a 529. In South Carolina, there is no limit on tax deductions and the 529 can be used on private k-12 schools, which will save parents 7 percent on tuition cost.

Here's the downside, if you don't use the money for education, then earnings in a 529 become taxable and subject to a 10 percent penalty.

Also, FAFSA does factor in a 529, which could mean less opportunities for government grants and loans.

"Another thing I really want folks to focus on is the American Opportunity Tax Credit,” Rogers said.

The AOTC is a credit for education expenses during the first four years of college. The maximum annual credit is $2,500 per student as long as you make less than $80,000 a year or, as a couple, make $180,000.

Earn too much? Here's a money wizard tip: contribute to a 401k to bring your total earnings down. Save for retirement and get AOTC credit!

There’s also two for one. Students get two for one when they take college classes while in high school -- duel enrollment or move on when ready counts towards college and high school.

“If it comes from an accredited college, the transfer is much more likely than from an accredited AP courses,” Rogers said.

IRAs have a back door where you can go to access your retirement for educational expenses.

“If you put this money into your retirement plan, on paper you look like you have nothing,” Rogers said. ”Your child qualifies for whatever financial aid they're qualified for, and then, if you need to pull money out to augment their college expenses, you can pull it out of your IRA or Roth IRA penalty-free.”

Wood, meanwhile, has seen the light as she watches her first-born prepare to embark on the next chapter of her life.

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