As a father of two young children (Six years old, and 6 months old at the time i’m writing this) my mind routinely wonders off into future planning mode. I think about graduations, proms, health coverage, and of course…

College Costs

According to Dave Ramseys and Rachel Cruze’s book Smart Money Smart Kids current college graduates are leaving school with an average student loan debt of $27,000. That’s not a small amount of money. And since i’m such a forward thinker, I plan on eliminating my children from that average. And if you read all the way through to the end I will show you some tips and strategies that you can use too.


Even after earning a scholarship I somehow left college with student loan debt. How is that you ask? Well I’ll tell you…


For some reason I believed that graduating in 4 years meant something to employers. In my mind I thought when I began interviewing for jobs in the real world, every employer would look at the time it took me to graduate. Silly me…I was so convinced of this that I took out student loans to cover two summers worth of school to graduate on time. (If only you could see my face right now as I type this) I was completly sold on the idea of going into debt in order to earn more down the road.

I know you are saying to yourself “Well that is what I have to do“. Well my beloved reader I’m here to tell you we were wrong. Not only was my philosophy completely formed by some well intentioned mis-information. Everyone with a degree and the debt to prove it somehow didn’t get the correlation either. So I would get kudos for my determination and will to succeed. All the while mortaging my 30 something version of myself’s financial future. If only I could go back and shake some sense into myself… If only my parents had known about the following strategies to pay for college costs, I could be a Kabillionaire by now. (Kabillionaire is not a real word, please insert any amount of money you are comfortable with inserting)

So on with the strategies…

The Education Savings Account – The following quotes and information comes from


Back when it was the Education IRA, not too much (despite the lure of tax-free income). In 2002, however, the re-named Coverdell education savings account became a very attractive college savings vehicle for many people, including families that wish to save for elementary and secondary school expenses as certain K-12 expenses were added to the list of qualified expenses. In fact, even if you like the 529 plan you may still decide to contribute the first $2,000 of savings for each child into a Coverdell account.

This plan is very appealing to parents with young children that want to begin saving for college and don’t know where to start. In my opinion the pros out weigh the cons.

Here are some cons

In 2002, the contribution limit was increased from $500 per child to the much more reasonable level of $2,000. However, you need to be careful when accounts are established by different family members for the same child. If total contributions exceed $2,000 in a year, a penalty will be owed.

The relatively low contribution limit means that even a small annual maintenance fee charged by the financial institution holding your ESA could significantly affect your overall investment return.

Here is a major pro

The ESA is on equal footing with the 529 plan when applying for federal financial aid. The account is considered an asset of the account custodian, typically the parent. Withdrawals are not reported as student or parent income as long as it is tax-free for federal income taxes. If used properly, The Education Savings Account can give your children the headstart to wealth that every parent should want for their child.

The 529 Plan – The 529 Plan and the ESA are very similar, with the 529 being the predecessor.

A 529 Plan is an education savings plan operated by a state or educational institution designed to help families set aside funds for future college costs. It is named after Section 529 of the Internal Revenue Code which created these types of savings plans in 1996. There are also two types of 529 plans which you can access or use in every state in the U.S.

Savings Plans work much like a 401K or IRA by investing your contributions in mutual funds or similar investments. The plan will offer you several investment options from which to choose. Your account will go up or down in value based on the performance of the particular option you select. You can see how each 529 plan’s investment options are performing by reviewing our quarterly 529 plan performance rankings. [updated date 11/2014]

Prepaid Plans let you pre-pay all or part of the costs of an in-state public college education. They may also be converted for use at private and out-of-state colleges. The Private College 529 Plan is a separate prepaid plan for private colleges.

“But I Can’t Afford it”

Now here is where most people will falsely believe that their lack of a high income will bar them from utilizing either the Educational Savings Account, or the 529 plan. If this is you take deep breath…Wipe your brow if you are sweating…Get a little closer to the device that you are using to read this…Now listen closely…


The truth that I now know to be true, is that money is just an idea away, and it is also a renewable resource. So check out the idea here that has helped me leave behind workaholism, and become a present and engaged father to my two children

I hope you have found this post to be educational, and hopefully inspirational.


This article contributed by Rodney Kellum. To visit his site click here.