- The Washington Times - Monday, August 18, 2003

George J. Gonce and his wife, Marguerite, have an ambitious goal: To pay the college tuition for each of their 10 grandchildren. They know this won’t be easy, given the soaring cost of college in the United States. Even if all 10 grandchildren choose a public four-year school, which tend to cost less than private schools, the total cost for the couple could reach a staggering $163,000, according to estimates using today’s dollars.

The Gonces, who live in Pasadena, Md., have already gotten started, enrolling the first nine grandchildren in Maryland’s state-run college savings program. The couple has begun the paperwork to enroll the 10th grandchild, who was born a few weeks ago.

For each grandchild, Mr. Gonce plans to set aside enough money to pay for two years of college, with his wife setting aside enough to cover the remaining two years. Together, the couple is investing between $65,000 and $70,000 annually.

“I don’t think there is anything more important than education. It’s the greatest gift an adult can pass on to a child,” said Mr. Gonce, who, at 76, still runs the family’s funeral parlor business but plans to retire soon.

Rising tuition costs and a sluggish economy have made it much tougher for parents to pay for college in recent years, but more grandparents like the Gonces are coming to the rescue, according to financial planners and state-run college savings plan managers.

A survey of 1,000 grandparents this month by AIG SunAmerica Mutual Funds, an arm of the retirement planning firm SunAmerica Inc., found that 54 percent of respondents are contributing or plan to contribute to their grandchildren’s college costs.

One quarter of those surveyed said they expected to pay between 25 percent and 50 percent of these costs, while another 20 percent planned to pay as much as 75 percent.

Two percent have invested in state-sponsored 529 savings plans, which allow account holders to set aside money tax-free. Eighty-nine percent have not invested in a 529 plan and 9 percent said they did not know such plans existed.

The survey did not examine the financial impact paying for college has on those grandparents, but it’s likely many of them have trouble pitching in.

Financial planners note that elderly Americans on fixed incomes are already dealing with rising medical costs and a higher cost of living.

Mr. Gonce said he and his wife’s decision to save for their 10 grandchildren has not caused them hardship.

“We still have an income from our business. We have savings and a pension plan. We’re in pretty good shape to do this,” Mr. Gonce said.

Fifteen percent of the grandparents who responded to the survey said their son or daughter had expressed a need for financial help to pay for their children’s college.

Seven percent of the respondents said they decided to pitch in when their son or daughter became divorced.

The survey did not determine any link between the number of grandparents who live with their sons or daughters, or whether that living arrangement affected their decision to help with the family’s college bills.

“It’s very difficult to bring up a child and rear them [while] saving for their education. Families are finding it’s pretty tough to make ends meet without help these days,” said Betsy Treitler, a SunAmerica senior vice president who helped conduct the study.

During the 2002-03 academic year, the average annual cost for a student who attended a four-year public college or university was $4,081, up $356, or 9.6 percent, from the previous year, according to the College Board, a nonprofit trade group that represents 4,300 colleges and universities.

The average annual cost for a student who attended a four-year private school was $18,273, up $1,001, or 5.8 percent, from last year, the College Board reported.

Almost 70 percent of students attending four-year colleges pay less than $8,000 for tuition and fees. Seven percent of students attend colleges where tuition and fees total $24,000 or more, according to the College Board.

At four-year private schools, more than 75 percent of students receive some type of financial aid. More than 60 percent of students at four-year public schools receive aid, the College Board reported.

SunAmerica recently published a brochure that it distributes to financial advisers designed to help grandparents understand college costs and different financing options, Ms. Treitler said.

“There’s a steep learning curve [grandparents] have to go through. They’re not really sure what a 529 plan is. I don’t know how much they get it,” she said.

A 529 plan is similar to a 401(k) retirement savings plan because it allows earnings to grow free of federal taxes.

But unlike earnings from a 401(k) plan, which are taxable upon withdrawal, money withdrawn from a 529 account isn’t subject to federal taxes as long as it is used for tuition, books or other college expenses.

Between 15 and 20 percent of the account holders in Virginia’s 529 plan are grandparents, said Diana F. Cantor, the program’s executive director.

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