If you're good at planning ahead, you may have thought about it before your child was even born, perhaps while you were shopping for a bassinet and teddy bears. At any rate, you probably started thinking about it when your child was very young. After all, it's one of the major responsibilities you face as a parent: your child's college education.

Personal growth and expanded horizons are reason enough to send a child to college, but there are more practical considerations, too. College graduates have more jobs to choose from, and they generally make more money than people who have a high school education. That makes a college education very important for your child's future.

Start Early, Early, Early

As a parent with an eye to the future you should start early to save for your child's college education. College costs have risen consistently for the past 10 years, and there's little reason to think this trend will reverse itself. Most cost estimates predict annual increases of 5-7%. What's more, many people take more than four years to finish college and some go on to postgraduate studies, so you may need to save even more.

To see just how expensive college is likely to become, take a look at the chart below.

Estimated Cost of One Year of College Education, Including Room and Board
School Year	Public - 4 Year	Private - 4 Year
1997-1998	10,228	21,583
1998-1999	10,842	22,878
1999-2000	11,493	24,251
2000-2001	12,188	25,706
2001-2002	12,914	27,248
2002-2003	13,689	28,883
2003-2004	14,510	30,616
2004-2005	15,381	32,453
2005-2006	16,304	34,400
2006-2007	17,282	36,464
2007-2008	18,310	38,652
2008-2009	19,418	40,971
2009-2010	20,583	43,420
2010-2011	21,818	46,035
2011-2012	23,127	48,797
2012-2013	24,515	51,725
2013-2014	25,986	54,829

Cost figures assume a 6% annual increase and use as a base The College Board 1996/1997 survey data for the current school year (tuition, room and board, transportation, books and other expenses). Source: The College Cost Book by The College Entrance Examination Board, New York.

A child born in 1995 will probably start college in the year 2013, when a private college education could cost $65,000 a year! Of course, these are only average estimates. If you have a specific school in mind, you may wish to contact the school- now and when the anticipated date draws closer -for information on tuition costs, how they have changed and the trend for future increases.

Clearly, it helps to begin saving early, preferably as soon as the child is born. The idea is to save or invest as much money as you can and pay taxes on as little as possible. It's like buying a house: the more you've saved ahead of time, the less you'll need to borrow. Set aside or invest as much as you can, even if it's just a small amount from every paycheck.

Increase your savings as your salary increases. Add extra cash from raises or yearly bonuses, as well as some of the money your child receives as gifts. Money that comes unexpectedly and has not been budgeted will not be missed. Also, if your older child has a part-time job, encourage him or her to put some of those earnings aside for college.

Strategies for Funding College Tuition

Growth Stocks and Growth Mutual Funds.Good investments in the stock market have the potential to provide better returns than insured, fixed-rate investments (such as savings accounts and CDs) if you have time to let the money ride the ups and downs of the market. This is a long-term approach to investing. And remember: What the stock market did in the past is no guarantee of how it will perform in the future.

The word to look for here is growth. When assessing the growth potential of a particular stock, consider looking for long-term appreciation rather than dividends. Dividends are taxable, but capital appreciation result in no tax until the stock is actually sold.

Investing in just one or two stocks is always risky. If you'd like to participate in the growth potential of the stock market with less risk, consider a growth mutual fund. Money invested in such a fund is professionally managed and is usually diversified over many stocks. This helps reduce risk. Also, you can start investing in mutual funds with a relatively small amount of money.

U.S. Savings Bonds (Series EE).You need only go as far as your local bank to invest in Series EE U.S. Government Savings Bonds. The face values of these bonds range from $50 to $10,000, but you buy them at only half their face value. For example, when you buy a $50 bond, you pay $25 for it. The interest rate paid on these bonds varies, and EE bonds reach face value in a maximum of 17 years.

These bonds can offer substantial tax savings if they're used to pay qualified higher education expenses. If all requirements are met, no federal income tax is due on the interest. To get this important advantage, you'll need to follow certain guidelines. Among them: The savings bonds must be issued in 1990 or later and be purchased in one or both parents' name(s)-not the child's. Married taxpayers must file a joint return. The owner must be at least 24 years old before the bond's issue date. The bonds must be redeemed by the owner in the year they're used to pay for qualified higher educational expenses. Qualified higher educational expenses generally include tuition and fees and exclude room and board. Talk to your tax advisor and the person selling you the bond to be sure you've set up the purchase properly. Also, there are income restrictions on who can take advantage of this benefit. You'll need to call the Internal Revenue Service or your tax advisor to verify your eligibility.

Life Insurance.You shouldn't purchase life insurance unless you need protection. However, life insurance can combine both protection against death and savings features. If you have a permanent life insurance policy, you generally have the option of borrowing against its cash value. Of course, the amount of cash value available to borrow against varies, depending on the specific policy. The death benefit will be decreased by the amount of the outstanding loan. The interest rate charged on such loans is often reasonable, and in many cases you can pay back the loan on a flexible schedule. Talk to your insurance representative about the advantages of life insurance when planning your child's college education.

Prepaid Tuition Plans.Certain states, such as Alabama, Alaska, Florida, Louisiana, Massachusetts, Michigan, Missouri, Ohio, Oklahoma, Pennsylvania, West Virginia and Wyoming, offer various types of prepaid tuition plans, generally for students attending state schools. Residents of these states can buy a contract or bonds at a fixed price, based on the rates of college tuition today. Payments can be made in lump sums or monthly installments. The state, in turn, invests the money to earn the difference between the amount you are paying and the projected cost of tuition at the time your child reaches college age. Those who sign up are fully protected, as the state assumes all the risk of the investments. Check with your state's commission on higher education to see if a prepaid tuition plan is available where you live.

Prepaid tuition plans are not for everyone. They mostly attract middle-income families who tend to be more conservative in their investments. Lower-income families using this option may jeopardize their chances for state aid and forfeit money needed for immediate essentials. If you're interested and a plan is offered in your state, you'll want to know if it covers only the cost of tuition, or room and board, too. Also, check to see if it applies to other than state schools. Finally, confirm that your original deposit will be returned if your child attends a private or out-of-state college, is not accepted at a state school or chooses not to attend college at all.

Hope Scholarship Credit. Generally, for tax years after 1997, this credit will reimburse up to $1,500 per year of the cost of tuition and fees paid during the first two years of secondary education for joint filers with adjusted gross incomes of up to $80,000 and single filers up to $40,000. This credit phases out as your adjusted gross income increases and you are not eligible for this credit if your joint income is above $100,000 and single income is above $50,000.

Lifetime Learning Credit (LLC). Effective July 1, 1998, this credit will reimburse up to $1,000 of college tuition and fees per year through the year 2002 and $2,000 each year afterward. To qualify for the full credit, a taxpayer would need to spend $5,000 on qualifying expenses through 2002 and $10,000 each year after. Parents with more than one child may claim a LLC for one child and a HOPE credit for a different child in the same year. The two credits, however, may not be claimed in the same year for one child.

Educational IRAs. You are now able to set up IRAs for the purpose of paying college expenses. Contributions are allowed until your child reaches 18, and contributions may not exceed $500 per child per year. The $500 limit is phased out for joint filers with income above $150,000, and single filers above $95,000. Contributions are made with after tax dollars. There is no tax deduction. This type of IRA allows you to make withdrawals for the purpose of paying college expenses. Neither ordinary income tax nor the 10% penalty for premature withdrawals apply if the distribution is used for tuition, fees, books, and room and board, and the taxpayer has not claimed either a HOPE or LLC credit in the same year as the distribution.

CDs and Bank Accounts(CDs) and bank savings accounts are two other places to put college savings. Although CDs and bank savings accounts are generally FDIC insured, they generally offer a lower long-term return potential than other investment vehicles and are most appropriate for those with short-term goals, or who wish to avoid any market risk.

Tax Considerations

Even if you invest wisely and defer the tax liability on savings for your child's college education, you'll have to come up with the taxes when you liquidate those investments. Chances are you'll be faced with taxes at a time in the future when you are likely to be in a higher tax bracket and have other additional expenses. You'll need to be sure your investments earn enough to cover the anticipated taxes.

It's important to note, too, that tax laws are constantly changing. Consult your tax advisor before you begin investing, then check back regularly. If tax law changes negatively affect your college investments, you may want to move the money. How and when you move the funds also can affect taxes, so be sure to talk to your tax advisor first.

Here are just a few examples of tax considerations affecting college funds:

• Loans. If you plan to take out a loan to help pay for your child's college expenses, the interest may now be deductible. Generally, if the taxpayer's adjusted gross income is below $60,000 for joint filers and below $40,000 for single filers the following interest may be deductible. The deduction is phased out ratably from $40,000 to $55,000 for single filers and from $60,000 to $75,000 for joint filers.

  A deduction may be claimed only on interest paid during the first 60 months in which interest is owed. Students may claim this deduction only if they are not claimed as dependents on parent's returns.

Year Offest Tax On
1998	$1,000
1999	$1,500
2000	$2,000
2001 and beyond	$2,500

• UGMA accounts. You can put assets in a Uniform Gift to Minors Act (UGMA) custodial account for a child. However, if the child is under age 14, all income earned by these assets above a certain level (determined annually by the IRS) is taxed at the parents' income rate, whether or not the parent is the custodian. For children 14 years old and older, the income on assets in a UGMA account is generally taxed at the child's rate. You should keep in mind that putting assets in your child's name may reduce the amount of financial aid he or she is eligible to receive.

Other Avenues for Revenue

Even if you start early, it may be impossible to save enough for your child's college education. That doesn't mean, however, that college is out of the question. You have other cost-saving options available.

Student Strategies. While they may not be options you should rely on, there are some strategies students can follow to help reduce their expenses prior to entering college and once they're in college. For example, many college students, particularly those who commute to a local school, are able to work part-time and summer jobs to help subsidize their tuition or simply to earn spending money. Be aware, however, that money earned by the child prior to college may reduce his or her eligibility for financial aid. Some colleges offer cooperative education programs where students rotate study with periods of career-related work, allowing them to earn money and credits at the same time. However, it may take more than four years to complete a degree through a cooperative education program. Ask the college admissions office about the specifics of their program.

Depending on a child's scholastic ability, he or she may be able to earn college credits by taking college courses or advance placement exams while still in high school. First- and second-year college students can also take College Level Examination Program tests for course credit. These options can represent a significant savings over the cost of a full-semester course in the classroom. Check with your child's high school guidance counselor or with the college admissions office for eligibility requirements and program specifics.

Another cost-savings possibility is to attend a community college for the first year or two, then transfer to a four-year college to complete a degree. This can be a more affordable approach to receiving a degree from a prestigious institution that you may have been unable to afford for four years. Of course, there is no guarantee that the college you have in mind will accept the transfer.

Financial Aid. Think of this in broad terms. You needn't be the sole source of funding for your child's higher education. For example, when your child receives a gift of money, put it into a college fund. When grandparents ask what to give for birthdays, suggest college fund contributions.

And don't forget the traditional sources of financial aid: scholarships, grants, work-study programs and government loans. Your child's scholastic record, course of study, athletic ability and choice of college are just a few of the variables that may affect the availability of these options.

If your family meets certain financial criteria, the federal government has a program of low-interest loans with extended payment terms. Relying too heavily on loans, however, is costly and can burden graduates with large debts just when they are working to establish their financial independence. Also, you should be aware that government financial aid programs are subject to change.

Home Equity. If you bought your home when your child was small, you're likely to have built up a significant amount of equity by the time college is in the picture. You can tap that resource for your child's education with a home-equity line of credit. Interest payments may be tax deductible.

Other Avenues for Revenue

Use the worksheets below to figure out just how much you need to save each month for that day your child heads off to college.

Annual Rate of Return Divisor Factor
Years Until College	4%	6%	8%	10%
1	12.2	12.3	12.3	12.6
2	24.9	25.4	25.9	26.4
3	38.2	39.3	40.6	41.8
4	51.9	54.1	56.4	58.7
5	66.6	69.8	73.6	77.4
6	81.1	86.4	92.1	98.0
7	96.6	104.1	112.3	120.8
8	112.7	122.8	134.1	145.9
9	129.5	142.7	157.7	173.7
10	146.9	163.9	183.4	204.4
11	165.1	186.3	211.1	238.3
12	184.0	210.1	241.2	275.7
13	203.6	235.4	273.7	317.0
14	224.0	262.3	309.0	362.6
15	245.3	290.8	347.3	413.0
16	267.4	321.1	388.7	468.6
17	290.4	353.2	433.6	530.0
18	314.3	387.3	482.2	597.8
19	339.2	423.6	534.9	672.7
20	365.1	462.6	592.0	755.4
21	392.1	502.9	653.8	846.8
22	420.1	546.2	720.8	947.6

Enter college in __________ years	Public School	Private School
1. First year of college	$____________________(1)	$____________________(1)
2. Second year	____________________(2)	____________________(2)
3. Third year	____________________(3)	____________________(3)
4. Fourth year	____________________(4)	____________________(4)
5. Your estimated net cost (add lines 1, 2, 3 & 4)	$____________________(5)	$____________________(5)
6. Divisor, choosing an annual rate of return (from the table above)	÷____________________(6)	÷____________________(6)
7. required monthly investment (line 5 divided by line 6)	$____________________(7)	$____________________(7)
This chart is for illustrative purposes only and is not intended to represent the returns of any product.

For More Information

REFERENCE MATERIALS

Getting Into College: A Quick Guide to Everything You Need to Know Pat Ordovensky, Peterson's $8.95

Financial Aid for College: A Quick Guide to Everything You Need to Know Pat Ordovensky, Peterson's $8.95

College Check Mate: Innovative Tuition Plans That Make You a Winner Debra Wexler, Octameron Press $7.50

PAMPHLETS

The quarterly Consumer Information Center Catalog lists more than 200 helpful federal publications. For your free copy write Consumer Information Catalog, Pueblo, CO 81009, call 719-948-4000 or find the catalog on the Net- http://www.pueblo.gsa.gov

For a copy of the pamphlet Teaching Kids About Money, send $1.00 to the National Center for Financial Education, P.O. Box 34070, San Diego, CA 92163.

RELATED Life Advice PAMPHLETS

See other Life Advice pamphlets on related topics: Becoming a Parent, Becoming a Grandparent, Choosing a Financial Advisor, Creating a Budget, Establishing a Trust Fund, Going Away to College and Life Insurance. To order, call 1-800-METLIFE.

This pamphlet, as well as any recommeded reading and reference materials mentioned, is for general informational purposes only. It is issued as a public service and is not a substitute for obtaining professional advice from a qualified person, firm or corporation. Consult the appropriate professional advisor for more complete and up-to-the-minute information.

Text may be reproduced for nonprofit educational purposes only. Reproduction of any graphical image, trademark or servicemark is prohibited.

Copyright 1995, 1996 Metropolitan Life Insurance Company
All Rights Reserved
Schultz PEANUTS Copyright United Feature Syndicate, Inc.
960113UK(exp1297)MLIC-LD