Save Money For College

Higher education isn’t getting any cheaper. In fact, annual double-digit percentage tuition increases at colleges across the country are commonplace.

There’s not much you can do about the rising costs, but you and your family can be proactive by starting to save for college today. One savings option to consider are state sponsored 529 plans.

A 529 plan is an education savings plan run by a state or educational organization that’s meant to help you put money aside for college. The great thing about a 529 plan, in addition to the saving-for-college part, is that the federal tax law provides tax breaks to anyone who sets one up.

529 plans fall into two main categories: prepaid college tuition and savings accounts. Specifics and programs offered vary slightly, but every state now offers a 529.

Prepaid tuition: This 529 allows you to pay for college tuition at today’s prices. For example, if annual tuition at State Tech cost $8,000 this year, you could, using a 529, pay for one year of college now or over time. When you enroll, regardless of how much tuition costs then, one year of college will already be paid up.

Savings account: This option allows you to place money into an account where it can gain interest and grow. Typically, you won’t pay taxes on the interest gained as long as you use the money in the account for higher education.

529 Advantages

There are many advantages to starting a 529 prepaid or savings account.

  1. Income tax breaks. The contributions made to a 529 plan are not deductible on a federal tax return, however, you’re allowed to grow the investment tax-deferred – this simply means your family can save money for college (and make payments toward tuition) without the obligation to pay taxes upfront. Local tax breaks are also a possibility.
  2. The money can only go toward education. If your parents or grandparents make a contribution, they can sleep soundly at night knowing their dollars will be going for college and only college. The beneficiary of a 529 can’t make withdrawals independently; the money must be used for college. For students, this removes the potential distraction of spending the money on late-night meals.
  3. Contributing to a 529 plan is easy. Once you’ve selected a plan all you have to do is fill out a straightforward enrollment form and invest the money through automatic deposits. After that, there’s nothing more you or your parents have to do. The plan takes care of the investment, the assets of which are managed by the state treasurer’s office or an outside investment company.
  4. Anyone can do it. There are no eligibility requirements and you can invest large amounts of money if you so desire. Typically, there are no income limitations or age restrictions, so family members can start saving whenever they want. And ,if you want to go back to school as a mature student, it’s possible to create your own 529 plan.
  5. Savings on inflation. Just like everything else, college tuition gets more expensive over time. Some students have even seem their tuition increase by double-digit percentages from one year to the next. Pre-paid tuition allows you to skip these increases by paying for college at today’s prices, and then cashing in your semesters when you’re ready to enroll.

How do I enroll?

You will need to contact the proper office at your state. For a full listing on what your state offers, contact information and plan details, visit, a site created by the National Association of State Treasurers.