Saving for College

Why invest for college?
High current costs

It currently costs nearly $17,336 to send a student to one year of public college and $35,374 for private college.1 When you add up four years of schooling for each child in your family, college can quickly become one of your biggest financial obligations.

Annual tuition inflation

According to the College Board, tuition costs at four-year public universities have increased an average of 7% annually over the past decade. With prices rising faster than the overall inflation rate, you need investments that give your money the potential to keep pace.

Higher earning potential

Data shows that the average bachelor's degree holder earns 63% more than the average high school graduate.2 It's true that tuition costs are high, but the value of a college diploma may be even higher.

Federal tax breaks

Tax benefits that were set to expire in 2011 have now been made permanent. Under the new law, qualified withdrawals from 529 college savings plans will remain free from federal taxes, meaning more money for a child's education and less for the IRS.

1. Source: The College Board, Trends in College Pricing, 2007. Includes tuition, fees, room and board, transportation, books and other expenses. Assumes in-state residency for public university.

2. Source: U.S. Census Bureau, 2005 data reflects mean income levels.

State tax laws may vary in the treatment of 529 plans. Please review this aspect carefully before choosing a 529 plan.

Strategies for college investors
Set a goal

Consult an advisor or our calculator to estimate future college costs and the monthly investments needed to pay them.

Start investing early

Simply invest whatever you can as early and often as possible. Starting early gives your college fund more time to compound and grow in value.

Increase contributions over time

Consider investing raises, bonuses and tax refunds as well as money that becomes available after loans or credit cards are paid off.

Learn about financial aid

Visit www.finaid.org for information about grants, loans and scholarships.

Invest in your name, not the student's

Accounts in your name count less toward financial aid eligibility and offer more control over how money is invested and withdrawn.

Involve other family members

College accounts allow multiple contributions from parents, grandparents, aunts, uncles, godparents and anyone else wishing to fund a child's education.

Consult an advisor

A qualified professional can help you choose college accounts and customize an investment plan to your exact needs.

Compare your college savings options
529 college savings plans Prepaid tuition plans
These state-sponsored plans offer high contribution limits, flexibility and control. Investments grow tax-free when withdrawn for qualified higher education expenses at any accredited college or university. These plans allow you to lock in today's prices for a future college education. They are typically administered by individual states and limited to programs offered by participating colleges and universities within that state.
Coverdell Education Savings Accounts UGMA/UTMA accounts
These accounts can fund any level of education, not just college. Eligible investors can contribute up to $2,000 per minor child each year. Investment growth is tax-deferred, and qualified withdrawals are free from federal taxes. These accounts are opened for the benefit of minor children but managed by adult custodians. Contributions are irrevocable, meaning they can't be taken back or transferred to others. Upon reaching adulthood, beneficiaries can withdraw assets for any reason, not necessarily college.
 
Ready to get started?

For more specific information, you can visit www.irs.gov, and refer to Publication 970 - Tax Benefits for Education. Consult your advisor or click here for helpful tips on building an investment portfolio to meet your college needs and other financial goals.