SPANISH FORT, Ala. — According to the College Board, the average total expenses for an in-state student at a four-year public institution in 2007-2008 (including room, board, tuition and fees) are $13,589 per year.

The average total at a private institution is $32,307 per year. Based on an average inflation rate of 6 percent for tuition, a child born today could expect to pay about $92,000 a year at a private school by the time they enter college.

It is no wonder parents are paralyzed by the thoughts of trying to save for college.

But all is not bleak. Parents today have more options for saving for college than ever before. Many of these options include some very nice tax benefits when structured properly. The secret to saving enough money for college that is never discussed is this: Start early!

The power of tax deferred compounding that is offered on many plans coupled with 15 to 18 years of steady planning and funding can result in a very nice college nest egg.

In this column I will introduce you to three of the more popular methods for college savings and briefly discuss their features.

Due to the space confinements of this column, this discussion will be abbreviated and will only act as an introduction to these plans. As always, seek the advice of a good advisor and thoroughly review all of the features of these plans.

The three main alternatives for college funding are: the Uniform Gift to Minors/Uniform Transfer to Minors Accounts(UGMA/UTMA), The Coverdell Education Savings Account (formerly the Education IRA), and 529 Plans. We will take a quick look at the features of each.

1.UGMA/UTMA: Contributions to these accounts are made after taxes.

For children under the age of 14, the first $900 of earnings is tax-free; earnings between $900 and $1,800 are taxed at the child's rate; earnings in excess of $1,800 are taxed at the parent's top marginal rate. All earnings for children age 14 and older are taxed at the child's rate.

There is no maximum contribution amount. The account is held for the benefit of the student by a custodian, which can be the parent. When the child reaches the age of majority the child becomes the owner of the account and the money can be used for any purpose, however, the beneficiary (the child) cannot be changed as these proceeds are considered an irrevocable gift to the child. Withdrawals can be used at any institution.

2. Coverdell Education Savings Accounts: Contributions to these accounts are made after federal taxes.

However, earnings grow tax deferred, and earnings are exempt from federal taxes if used for “qualified higher education expenses” during the year.

The maximum contribution amount is $2,000 per year. The account is held by a “responsible individual.” However, the child may assume control of the account at the age of majority.

The beneficiary can be changed at any time to any member of the family should the beneficiary decide not to attend college.

Ability to contribute is phased out based on income and no contributions are allowed by individuals earning $110,000 or more or by families earning $220,000 or more.

Withdrawals can be used for any accredited program, including K-12 and any institution eligible to participate in federal financial aid programs administered by the U.S. Department of Education.

3. 529 Plans: These plans come in two forms: The Prepaid Plan and the Savings Plan.

The prepaid plan in Alabama is run by the state treasurer and is designed to prepay tuition and fees. The cost per month varies depending on the age of the child.

Funds are managed and held by the State of Alabama. More information on the prepaid plans can be found at www.treasury.state.al.us/content.

The Savings plan is held by the account owner and can be invested in a number of places. The typical plan uses mutual funds that are either designed to match time frame until enrollment or self directed.

The 529 savings plans are offered in many states and a parent may purchase a plan offered in another state in order to use the mutual fund family he/she desires. However, there may be some tax advantages of using the plan offered in your home state.

Contribution limits vary by plan, but generally are $12,000 per year or a one-time contribution of $60,000 or more.

I know of one plan that allows a one-time contribution of $105,000. Contributions are made after federal taxes, and earnings grow tax deferred. Distributions for “qualified higher education expenses” are tax-free. The beneficiary can be changed to any family member at any time. There are no income or age limitations for contributions.

Withdrawals may be used at any institution eligible to participate in federal financial aid programs administered by the U.S. Department of Education.

Most of these plans are available through your investment advisor. Please review all of the features of each plan before making your decision on which plan to use. Each plan has its own set of rules, advantages, and disadvantages.

Special consideration should be taken with regards to income levels and tax brackets when choosing a plan.

Whatever your decision, the key is to start early and stay disciplined. The options are many and time is short, so talk to your advisor today.

George Harris Jr. is a 20- year veteran of the insurance and investment industry. He is a licensed insurance agent and a registered representative, offering securities through Avalon Investment and Securities Group, Inc., Muscle Shoals, AL, Member FINRA-SIPC. If you have questions or comments, or have a topic you would like him to cover, he may be reached at his Gulf Shores office at 251-968-1234 or via email at george@georgeharrisfinancial.com.