If you’re worried about saving for college, then join the club. The skyrocketing costs of a college education are in the news almost every day. College saving plans can help you create a roadmap for saving and investing your money, so you don’t take on astronomical debt.
College Saving Strategies
- Start saving now. The earlier you start, the more your money will be able to grow. You want to borrow as little money as possible because interest rates effectively double your costs.
- Invest that money. There are several different ways to invest the money you’re saving for college, and a 529 plan is the most popular. There are a variety of 529 plans to choose from, and they all offer tax benefits for families saving for future college costs. Each state has different rules and requirements, but many allow you to contribute over $250,000. Most plans offer different investment options to choose from, like mutual funds, ETFs, and CDs.
- Think about locking in the price of tuition. Many states offer prepaid tuition plans that allow you to lock in tuition and fees at state colleges and universities at today’s prices. The Private College 529 Plan is similarly structured and covers 270 private institutions, including Duke and MIT. These plans typically allow you to convert them into a standard 529 plan if your student doesn’t attend one of the plan’s colleges. While prepaid tuition plans have been tremendously popular, many states have had to scale them back because of economic downturns. Before you invest in a prepaid tuition plan, be sure to understand its requirements and limitations.
- Don’t count on financial aid. While you should plan to complete the Free Application for Federal Student Aid form, be aware that any 529 savings plans are considered assets that reduce the amount of aid you qualify for. However, this should by no means stop you from contributing to your college saving plan.