College Savings 101

Here are some of the terms you’ll see tossed around in your quest to pay for higher education:

529 Plan: An education savings plan managed by your state or individual educational institutions. Named after section 529 of the Internal Revenue Code, it's designed to help families save funds for future college costs without incurring capital gains tax once those funds are tapped.

FAFSA: Short for Free Application for Federal Student Aid, this form is a need-analysis document formulated by the U.S. Department of Education. All parents and students should fill this form out, regardless of financial circumstances.

PLUS Loan: Stands for Parent Loans for Undergraduate Students. A federally sponsored loan program, this allows parents to borrow up to the cost of their children’s education, minus other financial aid. Unlike other financial aid loans, this one is not based on need.

Pell Grant: A federally funded grant program awarded to students with substantial need, generally those from lower income families.

Perkins Loan: This federally funded, need-based program provides low-interest loans and is administered through the school’s financial aid office.

Stafford Loan Program: This federally funded program provides low-interest loans and is administered through banks and other lending institutions.