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The Best and the Brightest: Charting the Cost of America's Top Colleges

A quality higher education may be within reach if you consider some of the tax-advantaged vehicles potentially available to help you save for college.

 

We all want the best for our kids, especially when it comes to education. However, if you are shopping colleges today, you'll soon discover that those seeking a top-flight education are likely to experience a bout of sticker shock.

U.S. News & World Report sponsors an annual ranking of the best colleges in America. The study breaks the schools out into two main categories: national universities, which offer a full complement of undergraduate as well as graduate degree programs, and liberal arts colleges, which focus more on undergraduate education and award the majority of their degrees in liberal arts fields of study.

The excellence rankings were derived by assessing schools on such criteria as class size, standardized test scores of incoming students, and average annual as well as six-year graduation rates.

Among national universities, Princeton tops the list for 2018 -- its fifth consecutive first-place finish. The cost of attending this Ivy League legend for one year? A whopping $62,750 inclusive of tuition and fees, room and board. Harvard comes in second on the top-school roster, with a one-year price tag even higher than Princeton's at $65,609, followed by the University of Chicago and Yale, which are locked in a tie for third place. Similar and in some cases higher yearly costs were reported by the leading liberal arts colleges (see table).

The notable trend emerging from the study? Academic excellence does not automatically correlate with cost: The most expensive school for the 2017-2018 academic year, Columbia University, was ranked fifth among national universities with a one-year sticker price of $70,826.

The head of the class

National University
One-Year Cost (tuition and fees; room and board)
Liberal Arts College
One-Year Cost (tuition and fees; room and board)
Princeton University
$62,750
Williams College
$67,000
Harvard University
$65,609
Amherst College
$68,500
University of Chicago
$70,551
Bowdoin College
$65,980
Yale University
$66,900
Swarthmore College
$65,774
Columbia University
$70,826
Wellesley College
$66,984
Source: U.S. News & World Report.

A degree of planning

Despite steep tuition costs, a quality college education may be within the reach of many families. All it takes is a degree of planning. As a starting point, consider some of the tax-advantaged vehicles potentially available to help you save for college.

  • The Coverdell Education Savings Account -- This account allows for contributions of up to $2,000 per year, per student. Contributions are subject to phaseout for higher income taxpayers. Distributions are tax free if used for qualified education expenses. Coverdell Education Savings Account beneficiaries must be under age 18 when the money is contributed and the money generally must be distributed within 30 days of the beneficiary's 30th birthday (unless the beneficiary has special needs).
  • Prepaid Tuition Plans -- These allow you to prepay future tuition costs at today's rates, as a way to potentially beat the effects of tuition inflation. Each plan has its own set of rules. Generally, if the child decides not to attend the selected school, he or she will be able to use the plan money to pay tuition at other colleges and universities. However, if he or she decides not to go to college at all and money can't be transferred to a sibling, most plans will generally reduce or eliminate any interest earned, and they may charge a cancellation fee.
  • Section 529 Plans # -- Section 529 college savings plans are state-sponsored investment programs that allow you to invest your contributions in mutual funds or similar managed financial instruments. Individual state plans typically do not impose annual contribution limits, and many allow generous lifetime limits of $300,000 or more. Distributions for qualified higher education expenses are tax free. Non-qualified withdrawals are subject to a 10% penalty to the extent they are includible in income.

Additionally, note that the 10% early withdrawal tax -- which generally appies to distributions made from an individual retirement account (IRA) before the account owner turns 59½ -- will not apply to a distribution made to pay qualified higher education expenses of the account holder, a spouse, a child, or a grandchild. Such distributions would, however, be subject to federal (and possibly state) income taxes.
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