Back 2 School: Make a Down Payment on a College Education Now

Posted August 15, 2011 in Your Family & The Law by Arthur Buono

Some kids have already started a new semester and others are headed back soon. How are they (or you) paying for college? Wouldn’t it be great to graduate without a mountain of debt to work off?

  • It’s time to pony up the cash for another semester of tuition, room and board
  • Section 529 plans can help you keep the debt down
  • Not all plans are created equal and big differences in state taxes and fees lurk
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Section 529 Plans for Funding a College Education


For sure, student loans have helped many of us get a degree. They have left a lot of new job seekers in a deep hole though. Funding for federally guaranteed student loans and grants may also be in jeopardy. So the best plan may be to start saving now for that college tuition.

So-called Section 529 college tuition plans can help with this. Don’t think though that all 529 plans are created equal. Although they all avoid federal taxes equally, the same may not be true of state taxes. They also are not all equal when it comes to investments and fees.

The Financial Industry Regulatory Authority (FINRA) has an investor alert on 529 plans. Everyone aspiring to save for college for themselves or their children should read it. In addition to eight "lessons" for making smart 529 choices, the alert has four key takeaways to think about:

  • Contribution limits vary by state. Since in many cases you don’t have to reside there to enroll in a state’s program, this is a key factor
  • Even so, state tax advantages vary from state to state too and may depend on whether you are a resident of the state sponsoring the plan
  • Investment options vary greatly, so you need to do the same homework about risk, returns, and fees as with any investment
  • Fees and expenses vary greatly, even among plans offered within the same state. The costs you save, when compounded over the years, can make a huge difference in what’s available come time to use your savings

Start saving now. It seems preferable to borrowing, or relying on a "sugar daddy," to help with the bills.

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