College Saving for American Expats in France
You might be planning a year or two in France. You might be planning to stay permanently. But if you are an American citizen with school-aged children, you are likely still worrying about college. If your offspring choose a French or European university, you probably have nothing (financially) to worry about. We’ve put a little information on those costs below. But if there is a chance you will be dealing with a U.S. university (or even U.K.), some sort of savings plan is in order. So here are some options and frequently-asked questions.
Can I use an existing 529 plan abroad?
Many Americans now start life with a 529 plan, an IRS-approved account in which families can save for educational expenses and that receive certain tax benefits. Over the years, the number of ways that you can use money from a 529 plan have increased. And many international colleges and programs, including some in France, have been approved by the U.S. Department of Education to receive those funds. You can look up eligible institutions on the Federal Student Aid website here. If you already have one or more 529 plans for your children, keep in mind that you might want to cap how much you invest in them. If you’ve got children who are likely to make use of the less expensive programs abroad, building up funds in a U.S. 529 plan could be counterproductive. Stick with an amount you feel fairly certain can be used by your children for eligible costs (the IRS info on those here).
Can I open a 529 plan while I am in France?
Even though the U.S.’s 529 plans are administered by states, most of these programs do not require you to be a resident of the state. So if you do not have a problem with keeping a U.S. brokerage account (see this article), you should be able to sign up for a 529 for your child. You want to read carefully to compare fees, tax incentives and other provisions, as state programs can vary quite a bit.
If you don’t have an existing 529 account for your child and don’t have access to one, don’t worry too much about it. The biggest advantage of these plans is that you do not have to pay capital gains or income tax on withdrawals for eligible educational expenses. But saving in a regular investment account without a lot of trading won’t necessarily rack up much in the way of taxes, anyway. And using a more flexible type of account — one not limited to educational expenses — gives you the flexibilty to use your money for other things if your childrens’ tuitions and lodgings just don’t add up to much.
Other options: college saving for the near-term
Eligible expenses aside, if your child is already approaching the end of high school, you won’t be looking for an investment account anyway. A year or two in the stock market is as much a gamble as it is an investment. If college costs are coming up soon, any form of savings account that is earning some interest should work well.
In the U.S., those are usually money market accounts or CD’s. Qualified U.S. savings bonds used for higher education will also entitle you to a tax exemption for the interest earned. In France, the Livret and Plan d’épargne options are readily available for residents. And these generally do not come with the complications of many French products for American expats (see this article). What’s more, if you are looking at a French or EU-based educational program, you might not have much saving to do, as we explain below. So, a simple savings or bond account will suffice.
Other options: Saving for the long-term
On the other hand, you might have 5 years or more to build up an account. If you are willing to take on some investment risk to build up the size of the account, consider using an investment account in the U.S if you have access to one. In France, you could do the same with a regular brokerage account (compte titres) or make use of a PEA (plan d’épargen en actions). Pay attention to the requirements, though. This article explains why you should be sticking with direct holdings in U.S. accounts as long as you are living abroad.
How much does French higher education cost?
For those of us from the U.S., education in France is cheap. If your French-speaking child wants to stay in France for college, you are in luck. An applicant who has been resident in France for more than two years or holds a long-term residence card qualifies for the same public institution tuition as any other French or European national. According to Campus France (the French government’s website for all things higher ed), that will likely mean about € 170 per year for a bachelor’s degree. Doctoral and masters programs are slightly, and a school of enineering will set you back between anywhere from about € 600 to € 2,500.
Even if you are newer to France and paying international tuition rates, the public institutions will charge around € 2,770 per year during a bachelor’s degree and € 3, 770 for a master’s—much cheaper than anything you would see in the U.S. And some scholarships are available for non-French residents. Private institutions will likely be more, of course. Those tuitions range from about € 2,800 per year to about € 6,600 per year, depending on the program.
By way of comparison, we generally advise U.S. parents to plan for at least $22k to $75k per year in tuition, room and board and fees for U.S. universities, depending on public/private preferences.
And, of course, your French-resident child might want to make use of other EU opportunities for higher education. Many EU countries provide free or very low-cost access to higher education, even for non-EU citizens. You can look up higher education policies by country on the European Education Area website for more.
One minor note: the UK has not only left the EU, it has been following a U.S.-style policy with regard to education. You will find that while many UK programs qualify for U.S. financial aid (primarily loans) and for the use of 529 plan funds, they are generally much more expensive that their counterparts elsewhere.