THE EASY WAY TO SAVE FOR COLLEGE
July 15, 2016
Student loan debt is a major problem in New York State and throughout the country. It can cause extreme stress when people go through financial difficulties and still have to make their student loan payments. It’s also common for parents or grandparents who have co-signed on student loans to be forced to pay when their children become unable to repay student loans.
We strongly recommend avoiding student loans whenever possible. One way to do this is to start a college
savings fund for the children in your life. If you’re currently struggling financially, saving for college may seem impossible. However, it’s much easier than you might think!
529 Savings Plans
529 Savings Plans are offered by every state. They are investment accounts to save money for college, vocational school, and other kinds of higher education. Information about New York’s 529 plan is available at www.nysaves.org. 529 plans are very easy to set up and contribute to. You can set up an account with as little as $25. Contributions to New York’s 529 plan are eligible for state tax deductions. When money is taken out of the account to pay for qualified educational expenses, such as tuition, books, and room and board, it is tax-free. The money can be used at any accredited educational institution in the country. A 529 Savings Plan is the easiest way to get started saving for college. If you have $25, you can do it right now!
You can also use an IRA to save money for college. Did you know that money from an IRA can be used without penalty to pay for college? If the money is used for qualified educational expenses, such as tuition, books, and room and board, it will not be penalized by the usual 10% tax for early withdrawal. The nice thing about saving with an IRA is that if your child chooses not to attend college, the money can still be used without penalty during retirement. You have many, many options when you open an IRA. You can start with a visit to your bank or another financial institution.
The Sooner, the Better
No matter how you choose to contribute to your child’s college savings, remember the power of interest. If you save only $25 per month and receive 10 percent interest, over 18 years you’ll have more than $15,000 to give towards your child’s education. That can relieve a huge burden and significantly reduce the need for student loans. Saving for college doesn’t have to be intimidating. Start small, and stay consistent, and you’ll be able to give your children the gift of education.