With college costs climbing steadily upward nearly 8% per year many families are particularly concerned about accumulating enough money to put their children through college. College cost projections are continually increasing. Based on the latest averages from The College Board and recent average annual college cost increases, a child who entered kindergarten in 1995 will face four-year college costs of nearly $100,000 if he or she chooses to attend a public college in 2007. For a private college, costs will probably be double that.
Students who receive academic scholarships may exclude from taxable income on their tax return the amount required for tuition, fees, books and supplies. However, they must report as taxable income on their tax return any academic scholarship funds used for other expenses, such as room and board.
Qualified academic scholarships and fellowships are treated as tax free amounts on your tax return if all of the following conditions are met:

• the student is a candidate for a degree at an educational institution,
• amounts the student receives as an academic scholarship or fellowship are used for tuition and fees required for enrollment or attendance at the college, or for books, supplies, and equipment required for college courses of instruction, and
• the amounts received as an academic scholarship are not a payment for the students services, such as teaching other students.