The Effect of Alternative Savings Approaches on College Aid. Opportunity and Ownership Facts. Number 15.

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To pay for college, many low- and moderate-income students and their families rely on financial aid and savings. How students and families save--and in whose name--affects both the tax consequences and the impact of savings on financial aid. Choosing the wrong way to save can raise the out-of-pocket costs of college by thousands of dollars. Alternately, saving for college can result in tax penalties if families do not use tax-preferred savings for education. This fact sheet describes how taxes and financial aid formulas affect college savings. (Contains 3 notes and 1 figure.)