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Investing in You: Tips for Financing an Advanced Degree

by Christina Boyd, Merrill Lynch Senior Financial Advisor in Wayzata, Minn.

As a busy mother of two, I understand that it is easy to put off things that seem like a luxury--like going back to school. But it's important to keep in mind that an advanced degree is an investment, and it can yield significant returns.

For many, the main obstacle to overcome is how to afford it. You may be surprised to learn that financing options, including financial aid and 529 savings plans, are not just for your children. In fact, there are several options to make funding your advanced degree more feasible. But as with any good investment, you'll need to do your homework to determine which option, or combination of options, best suits your unique needs.

Ask your Employer
A good place to start is to ask your employer. Many companies offer some form of tuition reimbursement as part of its benefit package, but be aware that there are often strings attached. For example, to be eligible you may need to pursue a course of study that contributes to your professional development and is relevant to the company's overall business. You might also be required to work at the company for a number of years after graduation to fulfill your commitment.

Consider Financial Aid
Anyone thinking of returning to school should consider applying for financial aid, even if you're not sure that you will qualify. Although grants are often limited to undergraduate students, many adults are eligible for loans, scholarships and work-study programs. As a first step, you can file a Free Application for Federal Student Aid (FAFSA), which is the federal government's application for financial aid to calculate your financial eligibility based on your prior year's income tax return.

Set Up a 529 Plan
Though many families have set up a 529 plan for saving for their child's future education expenses, most adults don't realize that they're eligible for this savings option, as well.

A Section 529 plan is a state-sponsored college savings plan that offers different strategies and investment options to choose from that align to your risk tolerance and investment objectives. It is available to all individuals, regardless of income, and offers high contribution limits.

Among the benefits of Section 529 plans are the tax-deferred growth of your investment within the account along with tax-free withdrawals, as long as the funds are used for qualified higher education expenses. If you close the account, you may encounter a 10 percent federal penalty tax on the portion of the withdrawal attributable to earnings. Nonqualified withdrawals will also be subject to federal (and maybe state) income taxes.

Even if you do not plan to take classes full time or pursue a degree, you are eligible to invest in a 529 plan, and if you are not able to use all of the funds you have set aside, you can gift them to children, grandchildren, nieces or nephews for their college education, simply by changing the beneficiary on the plan.

Savings and Loans Options
Tapping into your savings or taking out a personal loan is another option for financing your degree.

Particularly in a down market, you may want to consider a revolving line of credit that borrows against your invested assets. Check with your financial advisor to see if their firm has an option that allows you to borrow against the assets you have invested with them, and thus you can avoid disrupting your investment strategy by selling assets or depleting cash reserves.

Keep in mind that it is typically not wise to use your IRA or other retirement savings plans to finance your education. Even if the usual early-withdrawal penalty of 10 percent doesn't apply, since the funds would go toward education expenses, these funds have been designated for retirement. Although pursuing an advanced degree may lead to a more lucrative career, you should not neglect your long-term retirement goals in the process.

Christina Boyd, recently recognized by Barron's magazine on their "Top 100 Women Financial Advisors" list, is a First Vice President-Investments and Financial Advisor with Merrill Lynch in Wayzata, MN. She resides in Orono with her husband, Dustin and two children. Christina can be contacted via www.fa.ml.com/ebbgroup, by email: Christina_Boyd@ml.com.

Before you invest in a Section 529 plan, you should obtain a copy of the plan's Program Description and read it carefully. The Program Description contains more complete information, including investment objectives, charges, expenses and risks of investing in the plan, which you should consider carefully before investing. You should also consider whether your or your designated beneficiary's home state offers any state tax or other benefits that are only available for investments in such state's 529 plan.

Merrill Lynch, Pierce, Fenner & Smith Incorporated is a registered broker-dealer and a wholly owned subsidiary of Bank of America Corporation.
Investment products:
Are Not FDIC Insured
Are Not Bank, State
or Federal Guaranteed
May Lose Value

Merrill Lynch makes available investment products sponsored, managed, distributed or provided by companies that are affiliates of Bank of America Corporation or in which Bank of America Corporation has a substantial economic interest, including Columbia Management, BlackRock and Nuveen Investments.

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