On Fri, 30 Apr 2004 17:13:07 CST, beliavsky[at]aol.com wrote:

- quote -

snip

Being naturally skeptical of any report suggesting that we not save
because someone else will take care of us, a comment.

Most of the "aid" I see consists of low-interest loans that must be
repaid beginning at a time when many parents want to retire. If, on
the other hand, there is a suggestion here that there are copious
amounts of needs-based free education money out there, someone please
furnish details.

I would also feel better about this report if it made it crystal clear
that such free money, if available, was not available to those of
above-modest means. And I do not call incomes beginning around
$40,000 "relatively well off."


-HW "Skip" Weldon
Columbia, SC

A recent paper from NBER studies how various ways of saving for
college can affect need-based financial aid awards.

The following paragraphs are from the summary at
http://www.nber.org/digest/apr04/w10357.html , and the full paper can
be purchased for $5 at http://papers.nber.org/papers/w10357 .

"In Tax Policy and Education Policy: Collusion or Coordination? A Case
Study of the 529 and Coverdell Saving Incentives (NBER Working Paper
No. 10357), author Susan Dynarski picks her way through two
labyrinths, taxes and financial aid, to calculate how much financial
aid may be lost for each dollar held in various savings vehicles.
Given the historically high levels of tuition nowadays, even
relatively well-off families can qualify for need-based aid, and thus
be affected by the aid rules. Dynarski finds that about half of
families with income between $40,000 and $100,000 are affected by the
aid tax.

Further, she finds that the parents of a high school senior who
attends four years of college can face a per dollar reduction in
need-based aid of 15 cents if the funds are held in a 529 savings
plan, between 26 and 39 cents if the funds are held in an IRA, and 40
cents if the funds are held in a mutual fund account in the parents'
name. Funds held in a Coverdell educational savings account can reduce
need-based aid by $1.22 per dollar saved. (The treatment of Coverdell
savings accounts changed in early 2004, after this paper was
completed.) Funds held in a Uniform Transfer to Minors Act account can
reduce aid by as much as $1.24 per dollar saved."