With the right planning, your family can achieve the dream of affording college. Here are three tips to help you build a nest egg for college.
1. START TODAY—NO MATTER THE AGE OF YOUR CHILD. It’s important to save as much as you can, even with a late start, since savings may reduce student loan debt dollar for dollar. A freshman borrowing $1,000 at today’s rate (4.53%) will repay approximately 1.5 times the amount borrowed. Therefore, reducing a student loan by $1,000 will result in not spending about $1,500 on interest and principal to pay off the loan.
2. PICK A SAVINGS PLAN THAT WORKS FOR YOU. Some college savings plans, including 529 Savings Plans and Coverdell Education Savings Account, benefit from substantial tax advantages. On the federal level, the investments grow tax-free over their life and can be withdrawn without paying taxes as long as they are used for school-related expenses.
3. TRY CROWDFUNDING FROM LOVED ONES. These days, saving for college is a family affair. Encourage relatives and friends to include college savings in their gifts for birthdays and holidays. Some credit cards also direct cash-back rewards to college savings. In addition, most 529 plans have online gifting programs and accept deposits from gift cards that may be purchased at retail stores.
Sterling National Bank offers access to Invite Education, whose handy online portal can help you prepare for the cost of college.