Because of increasing costs associated with the very successful Bright Futures Scholarship program, there are concerns qualification requirements - such as a higher grade point average - will continue to become harder to meet.

If you’re worried about what will happen to your child’s bright future, take a breath. There are alternatives available for funding a college education in Florida.

Recently, the State of Florida has made great strides in their university system and currently has many nationally-recognized colleges and programs. With the advent of the Bright Futures Scholarship program, many more graduates of Florida high schools have had the opportunity to get the majority, if not all, of their college tuition paid for.

Unfortunately, the program has been so successful that the total cost to the state–through lottery revenues has grown immensely. Coupled with major budget issues has caused the Florida legislature to implement several changes to the Florida Bright Futures Scholarship Program.

In addition, every time the state increases credit hour tuition rates at its universities there is an unintended effect of increasing the projected future scholarship program costs as well.  This is one reason more colleges and universities are increasing “fees” rather than credit hour tuition rates. Expect this trend to continue as total enrollment continues to increase and strains on the state budget continue to divert Florida Lottery revenue to other state programs.

The Bright Futures Scholarship program continues to offer three award levels based on academic standing.  To learn more about the program, check out the link at the end of the article. There are many scholarship specifics, so read and plan carefully.  For those who qualify, Bright Futures will continue to be the best source of funding for a college education, because someone else is paying for it.

In the event that a Bright Futures Scholarship is not in your future, or is insufficient to cover college expenses, below are some of the more popular options for covering the costs.  These alternatives can typically be used to augment any college costs not paid for by the Bright Futures program. As a reminder, most of the available tax deductions/credits at the federal and state level are subject to family income limits, proof of residency, academic standing and more, so plan effectively to maximize the benefits available:

1.)    Tax Credits - The federal government currently has two main tax “credits” available today to help offset current college tuition expenses known as the American Opportunity and Lifetime Learning credits. Tax credits are dollar-for-dollar reductions to your overall income tax liability - a great deal. The American Opportunity credit is new (valued at up to $2,500 per return) and basically replaced the Hope Credit.  The Lifetime Learning credit is available for all years of post-secondary education and courses which improve job skills. A taxpayer can claim a tax credit for 20% of their tuition and fees of up to $10,000 per year with a maximum credit of $2,000.  You can’t claim both credits for the same student during the same tax year so there is some planning involved. Check out IRS publication 970 for all of the details on these credits.

2.)    529 Plans - When the Federal government made withdrawals from the “529″ college savings plans exempt from taxes in 2002, the market for these accounts exploded into a multi-billion dollar business for the financial services industry.   These plans are run at the state level and administered by a third party.  The plans come in two basic types - pre-paid college tuition plans and college savings plans.  The main advantages to these plans are that there are no income limitations for contributions, the accounts grow tax free and the money can be used for many college expenses. In addition, many states allow residents of other states to enroll in their college savings plans. This is important because some states’ savings plans are better than others with regard to savings options, administrative expenses and what have you so you should shop around.

Don’t forget grants, other types of scholarships, student loans, ESA’s, IRA withdrawals, education savings bonds, work-sponsored programs, etc.  Be sure to consult your financial and tax advisors for the most appropriate overall college savings strategy when considering your goals, income level and timeframe.

There are options available to you, so get planning today before it’s too late.

Bright Futures Information: www.floridastudentfinancialaid.org/SSFAD/factsheets/BF.htm

State of Florida Prepaid and College Savings Fund: www.myfloridaprepaid.com

Article by Barrett Haus, owner of Haus Financial

Barrett Haus provides independent (through his own companies) financial and tax advising for businesses and individuals. He can be reached at 407-222-5120 or barrett@hausfinancial.com. Check us out on the web at www.hausfinancial.com.  If you would like to receive my email newsletter (every 2-3 months) send me an email and I will add you to the distribution.