College savings made simple

September is College Savings Month. Whether your student of choice is a child, grandchild, or yourself, it’s never too early — or too late — to start. With the tax advantages of a state 529 plan, even small, regular contributions can net thousands of additional dollars come tuition time.

It’s simply the ideal way to save for college.

While counterintuitive to publicly discuss family finances, I’m going to tell you about our family’s state-sponsored 529 plan, “IDeal” at Idsaves.org, which we started modestly when our daughter was in middle school. Named for a section in the Internal Revenue Code, this college savings vehicle is also known as a “qualified tuition plan” — as in qualified to enjoy annual state tax deductions. Contributions are deductible from income tax.

Now that she’s in college, instead of writing checks to the school, I deposit the amounts in IDeal, then send payments electronically to the school from there. When we can we deposit more, up to the deductible amounts, because we’ll need it for future costs anyway. It’s musical chairs with money, but why not, when it amounts to surplus cash via saved taxes?

IDeal contributions from Idaho taxpayers qualify for a state deduction up to $6,000 ($12,000 if married, filing jointly). Earnings grow tax-deferred, and if spent on education expenses (tuition, dorm, books, computer), withdrawals are not taxed.

Worried you’ll invest, then find the beneficiary won’t go to school? That’s OK; you can change the beneficiary to someone who will. It’s still your money; you can also pull it out. Just remember it will be taxed then, if not used for a qualified school expense.

Every invested dollar counts more, as tuition rates (and loan defaults) continue to surpass inflation and incomes. According to the College Board, average annual tuition and fees in 2017 reached $33,480 at private colleges; $9,650 (resident) and $24,930 (non-resident) at public universities. In Idaho, average resident tuition is $8,050 — that’s 44 percent more than five years ago. Add dorm and other typical expenses, and that annual cost exceeds $20,000 at University of Idaho.

Our account was easy to set up. At Idsaves.org I entered basic “owner” information (account owner can be family, friend, or any adult) and the beneficiary(ies) names, addresses, and Social Security numbers (or request forms by calling (866) 433-2533). Next I chose how to allocate risk, among options ranging from conservative to aggressive (the closer in time to college, the more conservative the recommended approach). Counting the walk to the mailbox with a $25 check to open the account (electronic transfers also possible), the entire process took 10 minutes.

I can get statements online or by mail. No, I don’t have to make regular contributions or worry about investment decisions. No, she didn’t need to start college at 18 or choose an in-state school; there is no time limit, and any U.S. accredited college or technical school (including dual-credit) qualifies. Keep in mind that like other family assets, IDeal is factored into available resources when schools analyze financial need, but only minimally (about 5 percent of account value typically counts toward the expected family contribution).

No; there is no initial fee for an IDeal account and the annual fee is negligible — less than 1 percent. The maximum savings limit per beneficiary is $350,000, not that we’d reach that without a lottery win.

It’s never too early or late to start an account. Like education itself, there is no age or income limit.

“Learning is not a product of schooling but the lifelong attempt to acquire it.” — physicist Albert Einstein

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Sholeh Patrick is a columnist for the Hagadone News Network. Contact her at [email protected].