According to MarketWatch.com, President Bush plans on signing
legislation that would increase college financial aid by about $20
billion over the next five years.

The new bill would reduce the interest rate on need-based student loans to 3.4% (currently 6.8%) over the next four years.

It would also increase the Pell grant maximum to $5,400 over the next five years.

Other provisions in the bill will help borrowers who are having trouble meeting payments due to economic hardships. 

For more details, click here.

If your children have custodial accounts - a UTMA or UGMA - and they will have college costs soon, you should consider taking account gains this year. 

The Kiddie Tax used to be for children under age 14.  In 2006 the rule was changed so that kids under the age of 18 were affected.  Starting in 2008 children under age 19 and children who are still dependents who are under age 24 will be subject to the Kiddie Tax rules. 

Under the Kiddie Tax rules, income over $1,700 earned by children (as defined above) is taxed at the parent’s tax rate instead of the child’s tax rate. 

I frequently recommend that parents use Roth IRAs to help save for their children’s college education. 

If the child has earned income, they could open their own Roth IRA; if they don’t have earned income, then the parents could use their own Roth IRAs to help save for college (assuming they qualify to contribute to a Roth).

But, can opening a Roth IRA hurt your child’s chances for financial aid?

"No", says Janet Bodnar of Kiplinger.com.  "Opening a Roth for your child probably won’t hurt his chances for financial aid. The federal formula for calculating how much a family can pay doesn’t assess retirement accounts — and that goes for your child’s account as well as your own."

Last month, the federal government launched a new online tool to help families predict whether they’ll qualify for federal financial aid. Called the FAFSA4caster, it’s modeled on the government’s official aid application, the FAFSA (which stands for Free Application for Federal Student Aid).

The FAFSA4caster estimates a family’s expected family contribution to college costs and notes whether a family will qualify for the federal Pell grant program, allowing families to plan ahead for the cost of college. To use the tool, parents will need to enter their child’s Social Security number, as well as their own tax and financial information.

I’ve gotten a lot of questions about the FAFSA form lately, as well as the best student loans to get.

Kiplinger.com has a great article on student loans right now.  Some tips shared include:

1. Determine which type of school your family can afford
2. Set a realistic limit on how much debt you can afford
3. Stick with the Federal loan programs - Perkins, Stafford and PLUS loans
4. After you’ve exhausted your options in Federal loans, get a list of lenders from the school, or from FinAid (www.finaid.com)

You can start completing and sending in your FAFSA (Free Application for Federal Student Aid) as soon as Jan 1.

Although the deadline for the FAFSA form isn’t until July 2, 2007, you’ll want to get yours in early.  This is one case where the early bird really does get the worm.

Even if you don’t think you will qualify for financial aid, you should complete this form.  Many schools require the FAFSA for merit and other non-financial need based awards.

Click here to get your FAFSA form or to complete it online.

One of the biggest savings goals that work-at-home-mom’s have is saving for their children’s college education. 

This is a challenging goal for most parents, especially as fast as tuition has been rising lately.

Tuition and fees rose an average of 6.3 percent for public 4-year colleges, and 5.9 percent for private colleges in 2006.

Tuition at 2-year colleges rose at a slightly slower rate of 4.1%, while room and board rose an average of 5.1 percent.

The average total cost of a college education in 2006 was $16,357 for a 4-year public college and $33,301 for a private college.