It’s Never Too Soon to Start Saving for College
With the rising costs associated with going to college, future college students and their parents must begin planning early. The National Center for Education Statistics estimates that tuition, fees, and room and board at a public institution run about $17,000 a year, while private colleges can range from $20,000 to more than $40,000. And higher education costs are expected to rise 5 percent per year, more than doubling by 2033.
It’s never too early to plan for your own or your child’s college education. Savings accounts can be opened at birth, and compound interest adds up over time. The Louisiana Office of Student Financial Assistance (LOSFA) suggests that high school juniors set up a checking or savings account if they don’t already have one. Summer job earnings can be allocated for college, or at least a portion of them. Paid internships can also help generate money for college and may even count for credit.
Families should also discuss college plans, as potential students need to know how much their family can contribute financially toward the experience. Paying for college using a credit card is likely the costliest option. Federal student loans may offer lower interest rates and be less of a burden on families. Just because a college may seem out of reach, it’s important to remember that financial aid, scholarships and other programs are often available. LOSFA suggests asking if the college you’re interested in hosts a financial aid night.
Finding out about scholarships will take some research, but your guidance counselor should be able to help. Taking college prep classes, participating in extracurricular activities and volunteering in the community can increase your chances of earning scholarships.
College Savings Options
- Learn about investing
- Be aware of special options for education savings:
– Education IRAs, also called Coverdell Education Savings Accounts
– Save up to $2,000 a year per student
– Earnings can be withdrawn tax-free if used for education
- Custodial account
– In student’s name
– Taxed at student’s (rather than parents’) tax bracket
- Prepaid tuition plans
– Save money for college, typically in a specific state
– Rises in value at the same rate as college tuition
- 529 College Savings Plans
– Tax-deferred accounts
– High contribution limits
– No parental income restrictions
MidSouth Bank offers simple checking and savings accounts with a $50 minimum to open. A College Savings Calculator can also help develop or fine-tune your education savings plan.
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