ÃÛ¶¹ÊÓƵ

As you consider the best ways to save and pay for college, take advantage of the many resources and tactics available to grow your savings, reduce the taxes you’ll pay, maximize financial aid and maintain flexibility in how you manage your assets.

529 plans are state-sponsored accounts that help families save for a child’s education. Investment growth is tax deferred, and withdrawals are tax free so long as the money is used for the beneficiary’s qualified education expenses.

Keep in mind, you must use 529 funds for qualified expenses to avoid taxes and penalties on earnings, which can restrict your financial flexibility. In addition, your investment choices are limited depending on the plan.

Like a 529 plan, an ESA is a savings account where your contributions grow tax-free, and withdrawals are not taxable when used for qualified education costs. However, annual contributions are limited to $2,000 per beneficiary, and eligibility phases out at higher income levels. On the plus side, ESAs do typically offer a greater range of investment options than 529 plans.

Trusts allow you to specify how, when and to whom funds are allocated, without any contribution limits. Specialized trusts can also reduce the assets considered by financial aid, under certain circumstances. However, trusts might create an annual tax obligation on investment earnings. A financial advisor can help you set up and maintain an education-focused trust that meets your needs.

It is recommended that you complete the Free Application for Federal Student Aid (FAFSA) form and the College Scholarship Service (CSS) profile, where applicable. Financial need is assessed by comparing the cost of attendance at a college or university with the family’s expected family contribution to education, which is tied to income, savings and certain types of living expenses.

Completing these forms can help you identify grants and scholarships that aren’t strictly merit based. Keep in mind, too, that you might be eligible for financial aid due to the expense of having several children in school or the complexity of your financial circumstances.

Loans may be part of a financial aid package as well. Your child may gain access to student loans that they repay after graduation, often with benefits like fixed interest rates and income-driven repayment options.ÌýParent loans allow you to borrow money for your child's education and provide similar benefits. However, they don’t offer all the borrower protections that come with student loans.

Taxable investments can be a good supplement or alternative to financial aid and tax-deferred accounts, even if they don’t have the same tax benefits. Putting money directly in stocks, bonds, mutual funds or even real estate investments can be particularly valuable if you want to maximize your investments’ wealth-building potential without the restrictions that come along with a 529 plan, ESA or education-focused trust.

Both personal and home equity loans can be used to pay for a child’s college expenses. Personal loans don’t require collateral but can often carry relatively high interest rates. Home equity loans may cost less but expose you to the risk of losing your residence if you are unable to repay the loan.

Some private foundations, corporations and philanthropic organizations provide educational funding based on a student’s grades and other accomplishments. Check with your child’s college counselor, as many schools maintain lists of local scholarships. You can also search online scholarship databases, which aggregate opportunities based on academic performance, extracurricular activities or community service.

There’s no single right way to pay for college. Use the mix of resources, loans and scholarships that meet your needs. A financial advisor can help you identify tactics that make the most sense for your situation and help you understand the tax implications of each approach.Ìý