Saving for College Should Get Top Priority.

• Position: Brief Article

The situation is frustrating, but Julia Perreault, director of financial aid at Emory University, Atlanta, Ga., sees it all the time. Parents who have saved money faithfully for their offspring's college education find out that another family, with the same annual income but no savings, is eligible for more financial aid than they are, evidence of the savings disincentive built into the current system.

In response, the College Board and college aid administrators have developed a better method of assessing a family's ability to pay, she explains. In the 2000-01 academic year, the formula used to calculate need-based aid will take into account families' need to save to finance their expected contributions for college. This change in methodology is designed to prevent a family from being penalized after saving conscientiously for college.

Savings incentives have become a higher priority for legislators as well, Perreault notes. The Education IRA permits a contribution of up to $500 toward educational expenses of a child 18 or younger. Although the contribution is not tax-deductible, amounts deposited in the accounts grow tax-free until they are withdrawn. The system must change to encourage more parents to save, she adds, because "paying for college is primarily the family's responsibility." She lists...