Jennifer Ward and Jessica Cafferata, JD, CFP®, CDFA®

College tuition, room and board, fees, books and supplies, meals, transportation, and medical expenses are examples of financial considerations for college and graduate school. Public and private four-year college tuition and fees have increased between 1-3% per year over the past five years according to College Board Trends in Pricing 2022. Average tuition and fees for public four-year colleges were $10,940 and for four-year private/non-profit colleges $39,400 from 2022-20231.

Pre-planning is essential when it comes to tax-efficient college saving strategies. By carefully considering various options and making informed decisions, you can potentially minimize the financial burden of funding higher education. Pre-planning helps with tax-efficient college saving strategies, below are some key methods.

529 Plan:

A 529 plan is a tax-advantaged savings plan designed for educational expenses. You can give up to five years’ worth of annual gifts up to $85K per individual ($170K for a couple) in 2023 without using your lifetime gift and estate tax exemption. It offers various investment options and tax benefits, such as tax-free withdrawals for qualified education expenses. Effective pre-planning includes selecting the right 529 plan, understanding the investment choices, and contributing regularly to maximize savings.

If your children or grandchildren do not use their 529 account, money can be moved from their 529 account to a Roth IRA if the beneficiary has earned income.    As of 2023, A maximum of $35,000 can be rolled over.  Since there are a lot of rules surrounding the transaction, we recommend you speak with your advisor or CPA.

Paying Tuition Directly to the College:

Payments made directly to an education institution qualify for an unlimited tax exclusion.  Qualified education expenses are for tuition only and do not include room and board, fees, books and supplies, meals, transportation, or medical expenses.  This can be tax-efficient because it can reduce your taxable estate while helping your child with their education.


Scholarships are a valuable resource for reducing the cost of college. This involves researching and applying for scholarships well in advance of college enrollment. By securing scholarships, you can minimize the need for other forms of financial aid and reduce the overall cost of education. If your children or grandchildren receive a scholarship and have a 529 account, you can withdrawal up to the amount of the scholarship for your education expenses without penalty, but taxes still apply.

Student Loans:

When applying for student loans, consider the types of loans available, interest rates, and repayment options. It’s important to explore federal student loans with favorable terms before resorting to private loans. Understanding the potential tax deductions related to student loan interest can also be part of your strategy.

Financial Aid:

For families applying for financial aid, most universities require students to complete either the FAFSA (Free Application for Federal Student Aid) or the CSS Profile (College Scholarship Service Profile).  The FAFSA and CSS Profile help determine expected family contributions and eligibility for federal financial aid.  Colleges use information about income and assets of students and parents, household size, number of children in college, and taxable income for example to calculate financial aid packages.  The FAFSA and CSS Profile weight assets, income, and other factors differently from each other.  Speak with your financial advisor, CPA, and financial counselor with any questions you may have.

Other ways of saving for college may include Uniform Transfers to Minors Act accounts, Coverdell Education Savings Accounts, permanent life insurance, and brokerage accounts.  Remember that every family’s financial situation is unique, so it’s advisable to consult with a financial advisor or tax professional to develop a personalized college savings strategy that aligns with your goals and financial circumstances. By proactively planning for college expenses, you can potentially reduce the financial burden and make higher education more affordable for your family.


  1. College Board, Annual Survey of Colleges; NCES, IPEDS Fall Enrollment data.



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