Regular, small savings deposits add up when it comes to financing a college education
by Christine Hensley
Iowa Student Loan Liquidity Corporation Board Member
For many families, the plan of how to pay for college is uncertain. And trying to figure out that plan can be intimidating.
But college can be within reach, even for those with modest incomes, as long as saving begins early. Reasonable, small monthly savings, if started when kids are young, can benefit from compound interest and earnings. And those regular contributions add up over time.
Now is a good time to start saving for a child’s education or examine savings to date. By putting away as much as possible now, even $25 or $50 a month, parents can expand college options for kids and reduce their future debt burden, helping them as they begin their careers and lives after graduation.
Savings can be put aside in any way desired, of course. But, investing in a secure way that could earn extra money is a good start. College savings 529 accounts are specifically designed for college and offer several benefits that a regular savings account does not.
Some benefits of 529 accounts include:
• Contributors can choose, and change, investment strategies, so they can be more or less aggressive over time.
• 529 accounts offer tax benefits in many states, including Iowa.
• Anyone can start or contribute to a plan, so family members and friends who want to help a child can easily do so.
• Minimum investments are small so contributions can be made over time, even when money is tight.
• Some employers may offer matching benefits for 529 accounts.
• Plans are transferable, so if one child doesn’t head to college or doesn’t use all the savings, the money can be transferred to another child.
• Contributors can always withdraw the money if needed before college, though there will be a tax penalty.
All states offer 529 plans and contributors can enroll in any they choose, but they should always check to see if there is a specific benefit to using their state’s plan.
ISave 529 (formerly College Savings Iowa) is the Iowa-sponsored 529 plan that lets anyone save for education expenses and provides certain tax benefits. Iowa taxpayers who are participants can deduct a certain amount of their contributions per beneficiary, including rollovers, in determining their adjusted gross income for Iowa income tax purposes. Visit the ISave 529 website for more details and deduction amounts.
Iowa Student Loan (ISL) Education Lending helps support Iowa parents who are saving for college with two programs. The ISL Education Lending Scholarship is open to Iowa residents who are the parents of current Iowa high school students or undergraduate college students, as well as to the students themselves. Simple online registration is available at www.IowaStudentLoan.org/Savings between now and December 2, 2024. A parent or guardian may register once on behalf of each qualifying student and the qualifying student may register themselves once. A total of forty-five (45) $1,000 deposits into ISave 529 accounts will be awarded through random drawings.
Parents of eighth- through 12th-grade students can also sign up for ISL Education Lending’s SP3 service at www.SP3.org for more chances to win money for college. SP3 sends twice-monthly emails with grade-specific college and career-planning tips for students, and after reading the articles, enter for quarterly drawings for college savings account deposits.
