ESA For Students: Pros and Cons Of Coverdell Education Savings Accounts

The Coverdell ESA (Education Savings Account), derived from the former Education IRA (Individual Retirement Account), is birthing split opinions in the U.S. The general purpose of the Coverdell ESA is to provide an avenue for Americans, especially parents, to save for future costs such as tuition, fees and similar expenses.

According to KJRH-TV, the Coverdell ESA has been generating concerns among a few sectors of the education community over funding impact. The main brunt of the cons seems to center on how Coverdell ESA will cause a reduction of fund for public schools. Currently, the public school system is tiding over a majority of students who cannot afford private school education.

Deborah Gist, Tulsa Public Schools Superintendent, tried to appeal to the public to rethink Coverdell ESA through social media. "DYK (Did you know) that schl vouchers could reduce Tulsa Public Schools funding by 15M," Deborah Gist posted. "Public ed is the most impt investment that we can make! #ESAisNotOK"

KJRH-TV points out that other public schools superintendents share Deborah Gist's stand on Coverdell ESA. However, more and more people are expressing favor for the Coverdell ESA. This is not surprising given the benefits that Coverdell ESA promises to bring.

The Motley Fool reports that Coverdell ESA funds can be used by parents on elementary and high school expenses as much they can use them on college tuition. Coverdell ESA also gives parents other investment options that non-Coverdell ESA plans do not offer. The main thing required for Coverdell ESA is to have all contributions made and completed before a child turns 18.

Also the Coverdell ESA has an annual contribution cap of $2,000 per child. Coverdell ESA uses the modified adjusted gross income threshold of $95,000 for a single taxpayer and $190,000 for married taxpayers filing jointly as eligibility for contributors.

The Coverdell ESA service fees vary for each institution so that parents must carefully assess the accumulated impact of these fees. While both sides of the issue have valid points to make, do you personally trust the Coverdell ESA?