3 numbers can help you pay for college
INDIANAPOLIS (WISH) – College costs are skyrocketing.
According to the College Board, the average in-state tuition in the U.S. is about $9,500. Add in room and board and the cost can double. But the state of Indiana has a program designed to help you put away money now, to ease the pain of paying for school later.
A 3- and 4-year-old arrive at their home just north of Indianapolis on a Friday evening from preschool. As they run around and play, college isn’t anywhere on their radar. But even if 4-year-old Olivia and 3-year-old Brayden have no idea what college is, mom Sarah and dad Nathan say college is likely a part of their future.
“They need to go to college. They have to. There’s not a choice anymore,” says Sarah.
To help fund their education, Sarah and Nathan Barras, daughter-in-law and son of 24-Hour News 8 reporter David Barras, are counting on the numbers: 5-2-9.
Troy Montigney is the executive director of the Indiana Education Savings Authority. He runs Indiana’s college choice 529 plan.
“Pretty much any individual can save for any individual in their life. I even have an account open for myself for graduate school study some day,” he says.
With a minimum deposit of $10, any Indiana resident can open a 529 investment account. As an incentive, you get a state income tax credit of 20 percent on the amount you put in the account each year, up to a maximum credit of $1,000.
“You can invest in either an age-based or year-of enrollment portfolio that’s kind of automatically set to grow more conservative as the beneficiary nears the age of college. There’s also individual funds that someone can choose reflecting different equities and commodities in the U.S. economy,” says Montigney.
Or, fixed rate CDs are available too. And profit you make on the investments is tax free if you withdraw the money for qualified educational expenses.
“Tuition, room, board, books fees any other mandatory fees associated with attendance. And actually, there’s a recent change enacted that make computers and associated equipment qualify expenses as well,” Montigney says.
Even if the beneficiary decides not to go to school after all, you can change the beneficiary anytime or ultimately pull the money out for other purposes. If you do that, you will pay tax on gains and there will be a 10 percent penalty on the amount withdrawn.
“I’m very fond of saying it’s never too early or too late to start saving for college. No matter where your child is on their pre-college educational journey,” says Montigney.
So while the kids play and college is not a concept they even understand yet, Mom and Dad are already taking steps to ease the pain of paying for school that won’t begin for more than a decade.
“I mean obviously we’re not putting in very much right now, but had we waited until 5 years from now, you’re starting at the very beginning,” says Sarah.
“And the statistics have shown it. The sooner you put money in, the more it will make over the long run. And that’s what we’re trying to do,” says Nathan.
Right now, there are about 300,000, 529 accounts in Indiana. And more than $3 billion invested.
Remember, because it is an investment account, you can lose money. But like any investment, the strategy is to invest over a long period of time, so it can ride the ups and downs of the market.