College savings expert gives tips on how to save on education costs

NEW ORLEANS (WGNO) ––– Graduation season is just around the corner, but with inflation on everyone’s minds, you might be worried about how you will pay for college. We spoke to one college savings expert who says the answer may be in a 529 savings plan.

529 plans are investment accounts that offer tax-free growth on educational expenses. Contributions and earnings are tax-free when used for qualified expenses such as tuition, room and board, or supplies. 529 plans are also flexible, allowing for changes in the beneficiary or account owner if needed.

There is a chance you or your child could get scholarships that cover the costs or decide not to attend college. You can take the money out and pay the income tax on any interest, and starting next January, you can roll that money over to a Roth IRA. 

With the high living costs, it can be difficult to set aside money for the future. Vivian Tsai, Chair of the College Savings Foundation, says the key is to start as early as possible and make regular manageable payments. “One of the advantages of saving on an automated basis is by making it automatic, paying yourself first, or when you think about it, paying for your child first. Saving as small an amount as $10 a month is actually pretty doable.”

Four-year colleges or universities can cost upwards of $25,000 each year. But if you’re willing to postpone your time at a larger school, there is another way to save, potentially cutting your spending in half. “Community colleges can really help you get or earn college credits at a tremendous discount to what typical other large-scale public universities or even private universities pay,” said Tsai.

The College Savings Foundation is hosting a conference in New Orleans Tuesday at the Bourbon Orleans Hotel. The conference will explore how the industry can work together to meet the challenges families face when financing college and the role of 529 plans. You can find more information here.