If college is right around the corner for your teen and you’re worried about how you’re going to pay for it, you’re not alone.

“It’s a challenge for families to pay their monthly bills and have extra money to save for what, at one point, felt like an expense that was far away,” says Deborah Fox, founder and senior financial advisor at Fox College Funding. Knowing that your concern is common doesn’t change the fact that you’re likely feeling pressure to jump start college savings. But how do you do that? Here are top tips for last-minute college saving strategies from financial experts. 

A 529 education savings plan functions like an investment account.

Consider a 529 Plan, But Know the Risks

There are two versions of the 529 plan to choose from — the 529 prepaid tuition plan and the 529 education savings plan. With the 529 prepaid tuition plan — which is only available in some states — you can prepay the average tuition at today’s prices and use the credits later at qualifying in-state schools. Be sure to read your specific plan’s terms and conditions for details. 

A 529 education savings plan functions like an investment account. By contributing to a 529 education savings plan, you’re actually investing your money into mutual funds or other investments, similar to how a 401(k) or IRA works. This means your money may be subject to fluctuations of the market. In other words, you could lose the money you put in. “Funds that need to be used within two or three years should be invested conservatively,” says Fox. Review your options with a financial expert so you understand the perks, risks and costs of your 529 education savings plan options. Also be sure you understand the restrictions and fees associated with your plan.  

With most 529 education savings plans, you can sign up in any state — not just the one you reside in. There are only a few with residency requirements for the saver or beneficiary. However, most 529 prepaid tuition plans do have residency requirements. Many states offer tax breaks exclusively to their in-state plan, but each state is different, so it’s worth it to compare plans to see which option gives you the biggest savings. 


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One of the perks of either 529 plan is that the earnings can grow without federal taxes, and the money is not taxed when used to pay for college. Some parents open a 529 plan for their children when they are young, but you can make contributions and withdrawals without penalty as long as the money goes toward qualifying educational expenses. You aren’t federally taxed on the growth, but state taxes may vary.

“It’s still a great way to save, even late in the game, especially if your family lives in a state whose 529 plan offers a state tax deduction,” says Fox. When you only have a few years to save, the tax deductions can be a meaningful benefit. Some states allow tax deductions with any state’s 529 plan, which is an added advantage. 

Get Family to Pitch In 

Asking family members to fund your child’s college education can sound like a big request, but it doesn’t have to be. When it comes to birthday, holiday and graduation presents, ask for donations to your child’s college fund in lieu of a gift. Tania Brown, a certified financial planner with Financial Finesse, tells people to give her kid a cheap gift and use the rest as a donation toward their 529 plan. Odds are your family will appreciate that their gift has a higher purpose. 

Encourage Classes That Count Toward College

Peggy Munro, EA, Founder of TaxPanacea and author of 529 & Other College Savings Plans For Dummies, recommends considering the financial benefit of Advanced Placement® (AP®) tests. She did this with her own child and it paid off in a big way. Since her son went to a college that accepted his AP credits, he was able to graduate in three and a half years, saving a semester of tuition. “That saved me $20,000 in exchange for about $500 in fees for AP exams.” To see if this will work for your child, first determine if they can be successful in an advanced class, then understand if their target schools are likely to accept AP credits. Similarly, your kid can enroll in courses at the local community college over the summer or concurrently with their high school work to earn credits that could potentially shave time, and therefore cost, off their college education. 

Don’t Tap Your 401(k)

Munro and Brown both advise against beefing up your kid’s college savings by dipping into your retirement savings. While it may be tempting to take money out of your retirement accounts if it’s there, there can be negative consequences to doing so. There are tax penalties for using retirement funds early and “you can borrow for college, but you can’t borrow for retirement,” says Munro. Or, as Brown puts it, “I would rather help my child find funding for college than sleep on their couch for the next 20 years because I didn’t prepare for retirement.”

When it comes to paying for college, most families will use many strategies to cover the bill. Typically, this process starts with filling out the Free Application for Federal Student Aid (FAFSA®). The FAFSA is your family’s first step in receiving financial aid, including grants, scholarships and federal student loans. Your child should also be applying for scholarships throughout their senior year and even after they begin college. Scholarships are free money that doesn’t have to be paid back, and even a few small scholarships can add up. 

This should not be considered tax or investment advice. Please consult a financial or tax advisor if you have questions.

Interviews for this article were conducted in 2018.

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