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How 'fiscal cliff' could impact college costs

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    What families can do for protection?

  • Duration 3:57
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Welcome back everybody if lawmakers failed to reach a deal to stop the US economy from going over that fiscal -- it could lead to significantly.

Higher college costs for many families.

And we're gonna tell you why and what to do about it in today's take charge consumer protection segment.

We wanted to look at how your family can protect itself.

Joining us financial advisor -- develop president diversified financial consultants Dominique thanks so much for coming in.

First of all let's start with what the fiscal -- has to do with college tuition and parents and kids.

Trying to pay.

Well who we were sitting here about a year ago in congress and the president couldn't agree on how to solve the major issues that we have been in this country.

So they created a fiscal nuclear bomb they literally stopped everything that was important to watch the citizens important today and things like.

Funding for colleges things like education things like Sosa could be stopped at all into a big nuclear bomb and -- in the thing's gonna go up on December 31.

Unless we do something in this -- where we are today where -- being forced to address the issue.

I'm thinking about when we were in elementary school that make us go down you know and and basically protect ourselves -- it happened but for families that's exactly what could happen and so many -- been affected by storms and other things.

First let's start with the tax credits college tax credit to those -- away for parents it this scheduled action to expire on and on December 31 so.

And -- congress comes back and it and the president jobs he signs it.

It to deal with some of these major issues like pell grants like work study.

We can see some very significant Cox in this area upwards of 8% cuts in benefits that go away so -- just thinking off the cuff or haven't thought about this before but should -- prepaid.

Next year's.

College tuition now maybe to have that as a deduction this year -- that's a great that's a great point it.

I think they are gonna do something with this this is too important to the president and certainly politically it's dynamite foot putt for congress I do believe -- -- address it.

Also the higher education act doesn't expire until next year so there's some opportunity come back in -- even if we -- over the fiscal cliff.

To come back and find some of these issues.

But we really do need to think about it going forward certainly plan for so what should parents do right now I -- I know for younger couples they always say get a Roth IRA.

Tell us why and is that a benefits I would actually recommend a college -- 129 plan and these are college -- higher education accounts.

They grow tax deferred and if you use it for higher education that -- could -- a culinary school or some type -- trade school.

That money actually comes out tax free.

Grand parents is a great opportunity of fun these accounts for your grandchildren get the money out of your taxable estate.

So planning ahead of time especially -- -- younger children really a priority here how much can you put any your -- your grandparent.

Well gifting right now at thirteen thousand per person per year -- husband and wife grand parents has 26000.

And are even higher limits if you -- to do a lump sum.

-- a -- trying to get assets out of your taxable estate and remember this fiscal -- Does include substantially.

Higher state taxes in the following year here's an opportunity to do some gifting into IE grandchild to count.

You retain control about a -- mentally go to college are higher education.

Wonderful planning told that higher state taxes on money that's already been taxed higher state 55%.

-- -- -- the ping pong effect they told us that that it's gonna go away and then it's gonna come back.

And that is going to go away.

And we're supposed to lead fighters and this -- -- supposed to be planning for -- for the next 51020 years very difficult process arts at the advice is talk to your financial accounts are -- one if you need one.

Make some action before the end of the year all active and maybe grandparents get involved capsule thanks so much -- play great to see you.

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