COLLEGE SAVINGS 101

Savingforcollege.com

Scoring an athletic scholarship
http://www.savingforcollege.com/articles/scoring-an-athletic-scholarship-637

Posted: 2014-06-18

by Kathryn Flynn

Do you know which country brought more fans to Brazil to watch the World Cup this year than any other nation? Thatís right, we did. Since the U.S. hosted the soccer tournament in 1994, American interest in the sport has grown immensely. For the last decade, Major League Soccer has been slowly emerging from the shadows of the NFL, MLB, NBA and NHL and its popularity continues to rise. After Mondayís big win over Ghana, our national pastime may have a new contender.

Sports have always played a major role in the lives of American families. Through schools, park districts and private organizations boys and girls have access to almost every type of game, including baseball, hockey, basketball, lacrosse and of course, soccer. Some argue that Americans actually put too much emphasis on sports, especially parents. Yet many are doing so with good intentions. If Little Joey happens to be the next basketball prodigy, does that mean he can go to college for free? Enroll him in camp, pronto!

Learn more about scholarships

With over 3 million registered players in the U.S. Youth Soccer Association, you have to wonder how many are expecting to receive some sort of award when it comes time for college. Unfortunately, most families who base their college plans on the hopes of a sports scholarship end up facing a harsh reality. NCAA athletic scholarships are only awarded to about two percent of high school students, and the average amount is under $11,000. Even if your child is talented enough to earn that much it will barely be enough to cover one year of tuition at a public university. Todayís average total costs of attending a four-year public school are around $23,000.

How much does college cost?

Weíre not suggesting giving up sports all together. In fact, participation in high school sports improves academic performance, strengthens leadership and time management skills and encourages healthy lifestyles. But instead of counting on a sports scholarship to pay for college, we recommend having a backup plan such as a 529 college savings plan. With as little as $25 per month you can build a significant college fund for your child that will be there no matter what happens on the field.

529 plans offer a number of unique benefits when the funds are used toward college expenses. Earnings in the account grow federal tax free, and many states offer additional state tax incentives for residents. Keep in mind, however, that if you make non-qualified purchases with 529 funds the earnings portion will be subject to a 10% penalty tax. But if your child does end up getting a scholarship and you donít need all of the money you saved to pay for tuition, a 529 plan can still come in handy. Purchases made toward books, supplies, equipment required for course enrollment and some room and board costs are all considered qualified higher education expenses.

Top five ways to spend 529 savings

Whatís more, there is a special exception to the penalty tax rule if a student earns a scholarship. Withdrawals made up to the amount of the tax-free scholarship will not be subject to the 10% penalty tax, but the earnings portion will still be subject to income tax. If you wish to avoid paying the additional taxes all together you can always change the beneficiary of the account to another family member who is planning to attend college. Either way, it wonít hurt to open a 529 account just in case your child misses out on that baseball scholarship. You might even consider making a large contribution instead of enrolling in an expensive private sports league.

Do you know which country brought more fans to Brazil to watch the World Cup this year than any other nation? Thatís right, we did. Since the U.S. hosted the soccer tournament in 1994, American interest in the sport has grown immensely. For the last decade, Major League Soccer has been slowly emerging from the shadows of the NFL, MLB, NBA and NHL and its popularity continues to rise. After Mondayís big win over Ghana, our national pastime may have a new contender.

Sports have always played a major role in the lives of American families. Through schools, park districts and private organizations boys and girls have access to almost every type of game, including baseball, hockey, basketball, lacrosse and of course, soccer. Some argue that Americans actually put too much emphasis on sports, especially parents. Yet many are doing so with good intentions. If Little Joey happens to be the next basketball prodigy, does that mean he can go to college for free? Enroll him in camp, pronto!

Learn more about scholarships

With over 3 million registered players in the U.S. Youth Soccer Association, you have to wonder how many are expecting to receive some sort of award when it comes time for college. Unfortunately, most families who base their college plans on the hopes of a sports scholarship end up facing a harsh reality. NCAA athletic scholarships are only awarded to about two percent of high school students, and the average amount is under $11,000. Even if your child is talented enough to earn that much it will barely be enough to cover one year of tuition at a public university. Todayís average total costs of attending a four-year public school are around $23,000.

How much does college cost?

Weíre not suggesting giving up sports all together. In fact, participation in high school sports improves academic performance, strengthens leadership and time management skills and encourages healthy lifestyles. But instead of counting on a sports scholarship to pay for college, we recommend having a backup plan such as a 529 college savings plan. With as little as $25 per month you can build a significant college fund for your child that will be there no matter what happens on the field.

529 plans offer a number of unique benefits when the funds are used toward college expenses. Earnings in the account grow federal tax free, and many states offer additional state tax incentives for residents. Keep in mind, however, that if you make non-qualified purchases with 529 funds the earnings portion will be subject to a 10% penalty tax. But if your child does end up getting a scholarship and you donít need all of the money you saved to pay for tuition, a 529 plan can still come in handy. Purchases made toward books, supplies, equipment required for course enrollment and some room and board costs are all considered qualified higher education expenses.

Top five ways to spend 529 savings

Whatís more, there is a special exception to the penalty tax rule if a student earns a scholarship. Withdrawals made up to the amount of the tax-free scholarship will not be subject to the 10% penalty tax, but the earnings portion will still be subject to income tax. If you wish to avoid paying the additional taxes all together you can always change the beneficiary of the account to another family member who is planning to attend college. Either way, it wonít hurt to open a 529 account just in case your child misses out on that baseball scholarship. You might even consider making a large contribution instead of enrolling in an expensive private sports league.

 

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