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College Funding

College funding is a complex and anxiety-producing process. In this section of 401kid.com, you will find up-to-date information on relevant college funding tactics. College funding, at its simplest level, falls into the following five categories:


The right combination of student and parental income during the college years goes a long way in chipping away at total Cost of Attendance (COA).  Income strategies ought to be carefully planned out because student income is factored heavily in the financial aid formulas.

College Savings:

Tax-advantaged savings vehicles, such as 529 Plans, Coverdell ESAs, UGMA/UTMA, and Roth IRAs, are generally the most favorable for college funding.  Learn more about and compare these vehicles in this section.


Dubbed “free money”, scholarships are naturally the preferred method of funding, but also a generally unrealistic one at that. Less than 2% of college students are able to fund all or a major percentage of their educations through scholarships. There are special grants, such as the Pell Grant, for lower income families, as well as special tax credits that are outlined further in this section.

Financial Aid & Loans:

Over $90 billion in public and private college student loans are available each year.  401kid evaluates and recommends different private college loan providers, and, most importantly, provides advice on Financial Aid Optimization (FAO), a process that works with families to maximize student financial aid eligibility according to the financial aid methodologies (FAFSA and CSS). Alternatives to loans include special grants for lower income families, as well as tax credits outlined further in this section.

Alternative Options:

There are a few other options not normally considered when families plan for college.  These include Series I and EE Bonds, Loans from 401(k) Assets, Mutual Funds, and Hedge Funds.