<p>"Families, even affluent ones, aren't getting the message that they need to save more for college and that a 529 college savings plan is likely the best option."
"A recent Gallup survey released by Sallie Mae found that 20% of those earning more than $150,000 aren't saving for college costs."
College</a> Savings Plans Underused - WSJ.com</p>
<p>I am not a financial advisor, but isn’t there an income limit on deducting 529 contributions? And if so, wouldn’t that impact how many people making more than $150K invest in 529s? Right now, most of them are probably saying, “Sure am glad I didn’t lose all that 529 money since I didn’t have one.”</p>
<p>The problem with selling investments right now, for all of us poor schmucks with kids heading off to college in the fall, is that most of them are low. I guess that means no capital gains.</p>
<p>There is no federal deduction for 529 contributions. State deductions vary and some states have no income tax at all. All the earnings on 529 contributions are tax-deferred until withdrawal, or forever if they’re used for qualified expenses. Imo, not getting a deduction is not a good enough reason for having NO college funds, especially at that income level! But maybe these folks are building home equity or stashing it in IRA’s/401(k)'s to use for college later. Better tax savings are available by maxing those assets out first.</p>
<p>Back in 2001 when Happykid was in 3rd grade I attended a “College Finance Information Night” at her elementary school. I came away from that presentation about the Maryland 529 and pre-paid plans with the clear understanding that there was no point whatsoever in my family trying to save anything for college. The figures we were told we would need to raise were impossible on our budget. And, even if we could have raised that figure over the course of the next nine years (as I recall, we were advised we’d need in the range of $150,000 for college), there was no one else in the family to transfer the money too if Happykid did not end up attending college. We put any savings that we could come up with into retirement funds.</p>
<p>What might have made a difference for us would have been a presentation that said:</p>
<p>Community college tuition and fees are half of in-state tution and fees, and that is roughly half of private college tuition and fees. Even if you can’t save $150,000 in the next 9 years in a 529, you probably can save $25 to $50 a month in an everyday savings account. At X% interest, $25 each month for the next 9 years would accumulate to Y dollars. Projecting an average annual %5 increase in tuition and fees for our community college and our state U, Y dollars could pay for the difference between two years at the community college and two years at the state U. Yes, you will pay taxes on the interest each year but really they will be minimal. And, since it is an everyday savings account if your child doesn’t need it to pay for educational expenses, you (or your child) could use the money for another purpose later on. If you want a rough guesstimate for how much financial aid your child might be eligible, here are some websites with accurate FAFSA and CSS Profile calculators.</p>
<p>Would I have put that $25 to $50 away each month if I had had that kind of information? Maybe not. But I would have left that meeting with information that would have been useful for my situation.</p>
<p>Happymom, that drives me crazy when “experts” trot out these fantastic numbers and speak as if no one will qualify for/receive aid of any type. They only discourage people from saving those “drop in the bucket” amounts, but all those drops do add up and make life easier when college time comes. At least you have SOMETHING to work with!</p>
<p>I had no idea when my kids were born/pre-school what their aspirations would be. So I regularly bought Series E bonds in my name with kid as beneficiary, figuring the interest was tax-deferred and could be tax-free if used for college expenses. If they decided not to go to college, I planned to give them to the kids when they were ready to buy their first home. I switched to 529 plans when my oldest was in 4th grade, making small contributions and some larger ones when I had a “windfall”. Neither of these strategies amounted to mega-bucks, especially now with market declines, but it has brought peace of mind knowing that I could give the kids a solid idea of what to expect from me for college financial support.</p>
<p>I did College Illinois’s pre paid tuition plan when my kids were in middle school. College Illinois paid out about $25,000 on my $16000 investment.</p>
<p>Older D ended up with about $23k in loans when she graduated, but it would have been significantly worse with the College Ilinois plan.</p>
<p>For my younger D, College Illinois almost makes up the gap between her merit scholarships and the cost of attendence, so she will end up with less than 10k in loans.</p>
<p>If I did not have College Illinois, their choices of where to attend college would have been much more limited.</p>
<p>I remember sitting around with a bunch of parents at a basketball tournament and being shocked that I was the only one saving anything for college. I wonder how many loans those poor kids have.</p>
<p>My payments for the program at that time where about $540 a month, which the other parents said they could not afford. Of course, I was driving a used Kia Sportage, and most of them were driving upscale cars and living in nicer houses than me. :-)</p>