Saving for College

Paying for college has become a major expense. One that unfortunately is too often met through student loans. This year, as a nation, we will add another $100 billion in student loans to our total outstanding college debt. Upon graduation, the average student currently owes $34,000—money that will not be available for housing, transportation, or consumer goods for many years after completing their degree.

Reducing our reliance on student loans to fund education should be a priority. There are a number of steps that can be taken to help pay for the cost of an education:

• -Actively pursue scholarship money.
• -Student could contribute money from summer jobs.
• -Shop around for good educational values. Some schools are more expensive than others. Consider staying in-state, or exploring reciprocal in-state tuition deals that may be offered by neighboring states.
• -Go to school part-time. This allows the student to earn money while attending college.
• -Delay the beginning of college by a year or two. This allows the student to save money, and could allow them to establish residency in the state in which he/she wants to go to school. In-state tuition can be 50% less than out of state tuition.
• -Start a college savings program like a 529 plan.

South Dakota was one of the last states to set up a 529 college savings plan. Because we were able to benefit from the experience of other states, we have one of the best-designed plans in the nation.

A 529 plan is an investment plan, operated by a state, designed to help families save for future college costs. Plans can be set up by parents, grandparents, siblings, aunts and uncles, or other relatives. Contributions to the plan are not tax-deductible, but no federal tax is due on any funds—including earnings—that are withdrawn to pay for college. The money can be used for tuition, books, and room and board, and can be used for any accredited college in any state.

The current minimum for opening an account is $1000 ($250 if participating in their Auto-Invest program) for South Dakota residents, with subsequent contribution amounts as small as $50. The upper limit is $350,000 on the total balance per account, which isn’t likely to be a problem for the average donor.