Insight

College costs can be scary

October 14, 2022
College costs can be scary
Key takeaways
College costs keep rising
1
Tuition and fees at public four-year schools rose 179% over the last 20 years, according to the Education Data Initiative.¹
Save early and often
2
The sooner you start, the greater the opportunity to grow and build your savings and cover more of the cost.
Family and friends can help
3
Most 529s allow family and friends to make contributions to your plan — or they can open their own.

October is a scary time for parents with Halloween’s haunted houses and witches, ghosts, and monsters showing up at your door. Another scary thing — the rising cost of college. The average cost of college tuition and fees at public four-year institutions has risen 179% over the last 20 years, according to the Education Data Initiative.1 That’s around 9% a year. Some other scary statistics from the Initiative: The average cost of tuition and fees at private four-year institutions has risen 124% over the last 20 years and college tuition costs outpaced inflation by 172%.

A 529 college savings plan, a can help make college costs a little less scary. Here’s why:

  • Tax-free growth potential as long as it’s used for qualified educational expenses.
  • For financial aid purposes, qualified withdrawals from a 529 plan aren’t reported on a FAFSA as long as a dependent student or their parent owns the account.
  • Some states offer a tax deduction or credit for 529 plan contributions
  • High contribution limits can help to maximize tax benefits. The lifetime contribution limit varies by state but ranges from $235,000 to $529,000.

Scare up more savings
Another thing that can help make college tuition less scary is that family and friends can open or contribute to a 529 plan for a child.

  • Almost anyone can open a 529 plan

Parents, grandparents, aunts, uncles, and even friends can open a 529 plan to benefit a child. (It can be a great way to leave a legacy.) It makes sense to start saving when the child is young to give the money more time to grow. One thing to keep in mind. For financial aid purposes it may be better to make contributions to an existing account. It’s important to discuss all the variables with your financial professional.

  • Anyone can contribute to a 529 plan

All 529 plans accept contributions from more than just the owner of the plan. Contributions can be made electronically or by check.  It’s usually easy to contribute to plan online.

Don’t let the cost of college scare you
Start saving for college as soon as possible. Learn more about a 529 plan. If you need help or have questions, contact your financial professional. See how to open a CollegeBound 529 Plan.

Footnotes

  • 1

    Education Data Initiative, “Average Cost of College by Year,” 1/9/2022, https://educationdata.org/average-cost-of-college-by-year. 

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