American parents are saving more for their kids’ college. That’s good, because tuition keeps going up.
According to the College Board, between 2008 and 2019, published tuition and fee prices rose by an average $930 (in 2018 dollars) at public two-year colleges, by $2,670 at public four-year institutions, and by $7,390 at private four-year colleges and universities.
September is College Savings Month.
More is good, but not enough. The average American has saved $18,135 for college (regardless of child’s age) — the highest since 2013, according to lender Sallie Mae’s report “How America Saves for College 2018.” But that’s less than a third of the average parent’s goal of $55,000, and a lot less than typical costs.
According to U.S. News & World Report’s annual compilation, last year’s average yearly tuition and fees were:
• $35,676 at private colleges and universities
• $21,629 for public, out-of-state students
• $9,716 for public, in-state
Community college is cheaper and can lower the bill for the first year or two, depending on the degree sought. In fact, tech certificates and skilled worker training is in high demand and often pays better, for less investment. That’s just not drawing enough interest.
According to the American Association of Community Colleges, average tuition and fees for U.S. community college students is $3,347.
Keep in mind none of those figures includes dorm fees. Room and board add another $8,000-$10,000 annually. School loans become gigantic beasts, so saving is paramount.
Sallie Mae reports only about 30 percent of Americans’ college savings are in 529 plans. Why more don’t go for 529s is a mystery.
A 529 plan — or in Idaho, an “IDeal” account — is simply a state-sponsored college savings vehicle with tax benefits. Named for a section in the Internal Revenue Code, 529 accounts are “qualified tuition plans” — as in qualified to enjoy annual state tax deductions (for contributions up to $6,000 if single or $12,000 if married filing jointly), as well as some federal advantages. Earnings grow tax-deferred, and if spent on education expenses withdrawals are not taxed.
Accounts are easy to set up and can be opened for as little as $25 at Idsaves.org. The account owner can be a parent, grandparent, friend, or any adult, for the benefit of a friend or family member. If that beneficiary foregoes college, the beneficiary name can be changed.
After that it’s easy to contribute or withdraw for education costs online (IDeal can mail directly to the college) when needed. We contributed in two chunks per year, but even the minimums of $75 quarterly, $25 monthly, or $15 with payroll direct deposit add up quickly.
I didn’t have to monitor or worry about investment decisions. No, the beneficiary doesn’t have to go to college immediately after high school; there is no set time limit. Like other family assets, IDeal is factored into available resources when schools determine financial need, but most schools only consider it minimally in financial aid packages. Generally they count about 5 percent of the account value, assessed annually by the school for the expected family contribution.
“Qualified expenses” include accredited four-year, graduate, community and technical college tuition and fees anywhere in the U.S. or at U.S. campus locations abroad; as well as books, dormitory, and course-required supplies (but not paying student loans, unfortunately).
State residents pay no commissions or initial fee for an IDeal account and the annual fee is negligible — 0.49 percent for Idaho residents. The maximum limit per beneficiary is $500,000.
It’s never too early or late to start. Like education itself there is no age or income limit.
“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 firstname.lastname@example.org.