Union Bank's Resource Library—Higher Education, Higher Finances

The cost of higher education is increasing at an alarming rate, with a price tag of $20,361 for one year of in-state private college and $9,649 for in-state public university.* But as the costs skyrocket, your options for financing a college education also increase. Provisions of The Taxpayer Relief Act of 1997 can provide you with help, whether you're saving for your newborn's schooling or deciding how to pay for your high-school senior's four-year education.

Time Is On Your Side
Thanks to this tax act, for the first time funds from your individual retirement accounts (IRA) may be withdrawn--penalty-free Ð for college expenses. Both the traditional IRAs and the new Roth IRAs have this option. Opening an IRA today means your money can build until your child's graduation, and then continue to grow for your retirement. The Education IRA is another saving option created by the new tax law. You can invest $500 a year for each child. That $500-per-year limit may be raised to $2,500 in upcoming years.** This type of account must be used for qualified higher education expenses. Leftover funds can be rolled over for another sibling or grandchild. Eligibility phases out for joint filers with an adjusted gross income (AGI) over $150,000; the limit is $95,000 for individuals.

College On The Horizon
If you're sending your child to college in the fall, help comes in the form of two tax credits--the Hope (Helping Outstanding Pupils Educationally) scholarship and the Lifetime Learning credit. The Hope credit can reduce your tax bill by up to $1,500. This covers tuition and fees and can be used only within the first two years of schooling. Also, the student must carry at least half of a full-time course load in at least one academic period beginning in that year.**

The Lifetime Learning credit aids students in their junior year and beyond. The maximum credit is $1,000 per family, no matter how many family members are enrolled in classes. However, this credit can be used for an unlimited number of years for part-time and graduate students, as well as full-time undergraduate students. The benefits from the Hope scholarship and Lifetime Learning credit can't be taken in the same tax year, however. In addition, you can't take these credits in any year you withdraw tax-free funds from an Education IRA.

A Strong Back-up Plan
Parents who don't have an opportunity to save, even if there is time, can still take advantage of other financial resources. Spend some time researching federal government grants and scholarships from the school and community. A good on-line resource is www.collegeboard.org. Also, check with the financial aid department of the institution your child hopes to attend.

We Can Help Sort Through The Options
In addition to offering IRAs for retirement savings and education expenses, we offer many types of student loans for your child. You can also use the equity in your home if you qualify. Many times the interest on home-equity loans is tax deductible. Consult your tax advisor for details. We would be happy to discuss the options for financing a college education, whether it's 18 years away or right around the corner.

*Investment services offered through Union Bank & Trust Company’s Trust Division.
Investment products: Not FDIC Insured - No Bank Guarantee - May Lose Value.