It’s IDeal to save for college

It just got a little cheaper to save for college.

That’s good news, since tuition keeps rising. According to U.S. News & World Report’s annual survey, the average cost of tuition and fees for the 2021-2022 school year is $43,775 at private colleges. At public four-year schools, the averages are $28,238 for out-of-state students and $11,631 in-state.

At public two-year institutions, tuition and fees cost $3,770 on average for in-state, in-district students.

One way to cut costs and reduce the burden when it’s time to enroll is by starting early with a 529 college savings plan (named for the applicable Internal Revenue Code section). Called an “IDeal” account, Idaho’s 529 plan provides both federal and state tax deductions which can save families hundreds of dollars each year a contribution is made.

Parents open them for children, but anyone can open an IDeal account for anyone of any age, including for yourself, a relative, or friend.

If the beneficiary doesn’t eventually attend college or technical school (anytime, anywhere in the U.S.), simply change the beneficiary. Since 2019, federally registered apprenticeships also qualify as an education expense for IDeal funds.

Otherwise known as a “qualified tuition plan” these accounts allow annual state tax deductions for contributions up to a certain limit, as well as federal advantages. Earnings grow tax-deferred, and withdrawals are tax-free if spent on qualified education expenses (e.g., tuition, dorm, and books — but not loan payments). Our family contributed up to the maximum limit in each year, then withdrew it when tuition was due.

The current deductible contribution limit is $6,000 for single filers and $12,000 for those married filing jointly. An account set up today can still reap 2021 tax benefits on contributions made through Dec. 31.

Employers can also benefit from making contributions and offer it as a perk to attract or retain workers in this employees' market. In 2020, IDeal began offering tax credits for employers who contribute directly to their employees’ 529 accounts.

An account is easy to set up with as little as $25 at Idsaves.org. No initial fees, no commissions, and negligible annual cost — which just got cheaper. On Dec. 1, IDeal institutes a 26% reduction in account management fees, dropping them from 0.49% to 0.36%. This cost reduction is the seventh since the program started in 2001.

Colleges do consider the IDeal account when assessing available family resources to determine student financial need, but only minimally. Typically, only 5.64 percent of account value is assessed annually as the expected family contribution to higher education.

Money in a 529 plan is still your money; keep, spend, or close it as desired, but don’t expect any tax benefits unless it’s used for a qualified education expense. And yes, there’s an app for that - just don’t confuse it with the similarly named one. Idaho’s IDeal mobile app is Readysaves 529.

“Learning is not a product of schooling but the lifelong attempt to acquire it.” — Albert Einstein

Sholeh Patrick is a columnist for the Hagadone News Network. Contact her at sholeh@cdapress.com.