There Is Always Downside Even with College Funds

college savings

Every parent from around the time they know their child is coming they start thinking about the costs. There are many expenses that come with a child, and one that needs some time to prepare for is their education. No matter what your child is interested in, there will always be some bill whether they want to go to college for over eight years to be a doctor or go to a trade school. Everything costs. A thought to consider is a college fund. Money is put aside just for their education. You need to be aware of some cons to look for when deciding the best option for your family.

Upfront Costs

Check into what it costs for you to start a college fund. Some are more expensive than others. Make sure to read the fine print. Or even better, discuss all your options with a trusted financial professional. They know your financial situation and will be able to guide you in the best college fund option for you. Some come with higher upfront costs but better perks. Others come with lower prices but have strict rules.

Financial Aid

While you are taking the time to sacrifice and put money away, know that it could affect the financial aid offered to your child. FAFSA takes a look at the whole picture when considering the needs of your child. For example, the college fund could affect the Expected Family Contribution or EFC. The higher the EFC, the lower the option for grants, work studies, or subsidized loans. One thing to help this is to put the fund in your name and not your child’s. Always talk to your financial advisor about your options.


There are penalties when it comes to college funds. They are all a little different.  Penalties for noneducational withdrawals are very standard. If you need to use the money for an emergency or something else, there with be a penalty charge. This means that If your child does not go to college for some reason, that money could be charged a fee for you to get it back. Another penalty comes with withdrawals, not on their timetable. Some plans only allow for a certain number of withdrawals or cap the amount per year. Know the limits of your plan. This way, you can plan ahead and make the most of your hard-earned money.

Lack of Control

Do you like to make your own investments and change things when you want? When signing up for a college fund, you are signing up for their plan. Their manager will be the only one investing and changing things. You will get to speak with them and give them your thoughts on how safe you want them to be with your investments, but ultimately you will not be the one doing it.

College funds are a very responsible thing to do as a parent. However, make sure you know all your options before jumping in.