How to Use ESAs

Paying for College
1

<p>I have three kids, twins who are seniors and the third in elementary school. We have saved about $25k for each ($75k total) in Education Savings Accounts. My question is how to best use this money. </p>

<p>I have heard many conflicting reports about how this money is included in FA calculations. For background, the twins are both excellent students who will likely be attending expensive private schools. We will likely qualify for some FA at private schools based on our income and assets. They already have qualified for full tuition scholarships at financial safeties. All three currently attend a parochial school.</p>

<p>The various strategies I have considered include:</p>

<ol>
<li><p>Don’t touch any of the ESA money until January of the twins’ Junior year of college. This is due to Withdrawn ESA money being included in the following years’ income for FA calculations. Is this true?</p></li>
<li><p>Use all the ESA during the twins freshman year. This will prevent the asset from being included in future years’ FA calculations. If Withdrawn ESA money is included in the following years’ income then this approach would be suicidal.</p></li>
<li><p>Transfer the all the ESA money to the youngest’s account so it won’t be counted against the twins. I believe this won’t work since all famly assets are included together.</p></li>
<li><p>The straightforward approach of using $7k per year (including assumed growth) for each of them.</p></li>
<li><p>I assume that it makes the most sense to save our youngest child’s ESA for college even though it can be used for her private high school. Should we deplete this asset before she starts college?</p></li>
</ol>

<p>Is there a single web site somewhere that describes how ESA money is accounted for in the FA calculations? Obviously the strategy that we use can have a huge influence in how it is credited by colleges.</p>

<p>Thanks in advance for your help.</p>

2

<p>I can’t be of much help but will answer #5. You need additional $ for youngest’s college, not less, so don’t deplete youngest child’s ESA. The reason you will need more money is not only because college will cost more by then, but because you are less likely to qualify for financial aid: your family size will reflect only one child (so your family will go down from 5 people to 3 and there is a higher allowance for living expenses in a larger family), you will only have one in college (even if one of the older children attend grad school, that is not counted) and your savings and assets will presumably have grown.</p>