Prepare for your child’s education

Tuition in some colleges or universities is more than $35k a year. But don’t be alarmed. The average tuition is well below that and more than 60% of students receive some financial aid.

Education Costs
2008-2009 Average Yearly College Costs (Four-year colleges / universities) 56% of students face tuition and fees of less than $9,000 $6,585 average for public schools $25,143 average for private schools Source: www.collegeboard.com	How much will it cost for your child’s education? Use the College Savings Calculator to: Find the cost of a specific school Adjust the cost for inflation Calculate how much you need to save each month

Investment options for college education

Your investment professional can help you fund your child’s education using one of these options:

• Coverdell Education Savings accounts – This option offers tax-deferred growth and tax-free withdrawals for educational expenses
• Uniform Gifts/Transfers to Minors Act accounts – This option gives your child ownership of mutual funds, securities and bank products that you, grandparents or others purchase on their behalf

Other education funding options, include:

• Section 529 College Savings plans – These state-sponsored investment plans offer tax-deferred growth and tax-free withdrawals for secondary educational expenses although investment options may be limited in some states
• Personal savings and investments
• Financial aid programs

Compare investment options for education

This side-by-side comparison of three common education savings options provides a brief overview and may help you decide if one is right for you. Your own personal circumstances may dictate different results than those shown here, so keep in mind that this isn’t advice. You should always work with your tax professional for tax advice.

 

	Coverdell Education Savings Account	Uniform Gifts/Transfers to Minors Act(UGMA/UTMA)	Section 529 College Plans
Description	Works like a Roth IRA but is earmarked for the beneficiary’s primary† or secondary education expenses	Allows minors to own a mutual fund, securities or bank products	State-sponsored investment plans for college expenses
Owner	Minor (beneficiary)	Minor (with a custodian)	Account donor
Contributors	Anyone can contribute	A custodian	Anyone can contribute
Maximum contribution	$2,000 a year†	No limit	Limits vary by state
Investment options	Broad range of options	Broad range of options	Limited. Age-based and static portfolios, vary by state Some states allow direct investment in mutual funds
Taxes	Significant tax benefits if withdrawals are used for qualified expenses Investment earnings accumulate federal income tax free Under certain circumstances, accounts can be rolled into another family member's Coverdell account without creating a taxable event	For children under 14, account earnings of more than $1,500 are taxed at the parents' tax rate For children older than 14, earnings are taxed at the child’s tax rate Capital gains apply to appreciated property when it’s sold Possible lower tax on dividends and long-term capital gains If the account’s custodian dies, the account becomes  part of their taxable estate	Qualified withdrawals are tax-free† Investment earnings accumulate federal income tax free Nonqualified withdrawals are taxed at a 10% federal tax rate (and possibly state tax rate) in addition to the standard federal tax rate of the account holder
Qualified expenses	Education expenses, including: tuition, fees, tutoring, books, supplies, related equipment, room and board, uniforms, transportation, extended day programs, computers used by the beneficiary††	Money can be used for any purpose without penalties or fines	Secondary education expenses, including: tuition, fees, tutoring, books, supplies, related equipment, room and board computers used by the beneficiary††
Financial aid implications	Could reduce financial aid May affect, or tax benefits may be affected by, HOPE Scholarship and Lifetime Learning tax credits	Could reduce financial aid	Less impact on financial aid
Final disbursement of funds	Money must be used by age 30 or earnings are taxed as ordinary income plus a 10% penalty Under certain circumstances, unused funds can be transferred to another member of the beneficiary’s family under without creating a taxable event	Account is closed and control of money is transferred to the child when he or she reaches the age of majority (18 to 21 depending on the state)	The donor retains control of account The donor retains money the beneficiary doesn't use for qualified expenses but would owe taxes on the earnings and pay a 10% penalty Unused funds can be transferred to another member of the beneficiary’s family under without creating a taxable event
Fees	The financial institution maintaining the account may charge fees	The financial institution maintaining the account may charge fees	Each of the state and asset-management firms may charge fees
Additional considerations	Contributions are limited if certain earning levels are exceeded	Easy to open and less expensive to set up than a trust	Can contribute to both a Coverdell Education Savings Plan and Section 529 College Savings Plan If a donor receives certain types of services from Medicaid, Medicaid may take some assets within the plan

Next steps

Contact your investment professional for more information about college savings investment options and how mutual funds from Nationwide can help.  Or, learn how to invest in Nationwide mutual funds on your own.

^{* Eligibility, features and tax benefits are subject to change.  Many are the result of the Economic Growth and Tax Relief Reconciliation Act of 2001 (“EGTRRA”), sections of which are scheduled to expire December 31, 2010.  Therefore, unless Congress enacts new legislation, many of these features and benefits may not be available.}

^{† Provision expires December 31, 2010.}

^{†† Certain types of expenses may not be qualified after December 31, 2010.}

NFW-1929AO