28 February 2011
Saving for College: What Are your Options?

As the costs for higher education continue to rise nationwide, saving for college can seem like an overwhelming task. In-state undergraduate tuition and fees for public universities rose 8 percent between the 2007-2008 and 2009-2010 school years while costs in private colleges climbed 7 percent, according to recent figures provided by the U.S. Department of Education. Average tuition for public schools is $6,400 and for private institutions $21,300. Although public universities in Nevada cost less than the national average, that ranking could change depending upon current budget considerations.

Start Saving Now

Because the cost of a college education is a major expense, the sooner you start to plan and save, the easier it is to make a place for it in your budget. Before estimating costs, however, you need to define the goal by deciding where your child will attend college and what type of institution it will be. Tuition costs for four years can range from as little as $12,000 for a community college to as much as $93,000 for a private institution. In addition to tuition and fees, you’ll have to factor in room and board, books and supplies, clothing, transportation and electronic devices along with other miscellaneous expenses when adding up the total cost. To make it easier to calculate, you can use an online banking calculator such as the one offered by Nevada State Bank. .

College Funding Sources 

Once you have an idea of about how much the college costs are going to be, you can consider these various funding sources that are commonly available:

  • Savings and money market accounts
  • Grants and scholarships
  • Student loans
  • Student employment
  • Section 529 accounts
  • Prepaid tuition plans

In developing a strategy for paying for college, most families discover that a number of these sources will come into play, depending upon their individual circumstances. As you continue the budgeting process, you can estimate how much you expect to receive from each funding source.

Money Market and Savings Accounts

Classic savings and money market accounts can be set up online with automatic transfers each month. When these accounts are dedicated as college funds, family members can feel secure that they are saving for college expenses down the road while earning interest and having access to the money at the same time. With a minimum investment of $1,000, you can also purchase Certificates of Deposit (CDs) for set periods of time, which can vary from seven days to five years. In addition to these products, Nevada State Bank also offers an Ultimate CD which combines the earning power of a traditional CD with the flexibility of a savings account. For more details you can click on www.nsbank.com/personal/savings/index.jsp.

Coverdell Education Savings Account

Set up with the intended student as the beneficiary, Coverdell Education Savings Accounts (ESAs) allow a maximum contribution of $2,000 per account per year. The beneficiary must be under the age of 18 or a special-needs student. Contributions are not tax deductible, but will grow tax-free until distributed as long as they are used for qualified education expenses. Although these accounts are most commonly dedicated to college costs, the distributions can also be used for elementary and secondary institutions that qualify under state law. If there is a balance remaining when the beneficiary reaches the age of 30, it must be distributed within 30 days. Also, the earnings become subject to tax at that time. You can open a Coverdell account by visiting any branch of Nevada State Bank.

Nevada College Savings Plans Program

The State of Nevada facilitates saving for college by offering the state-sponsored Upromise College Fund 529 Plan and the Vanguard 529 College Savings Plan. Both plans allow any US citizen or resident alien of legal age with a Social Security number or Tax Identification number to establish an account with a future college student as the beneficiary. You can withdraw funds tax free as long as they are used for qualified educational expenses. Upromise can be opened for as little as $15 per month as a payroll deduction while Vanguard requires a minimal initial investment of $3,000.

Families can also save through the USAA College Savings Plan, which provides a choice of six investment portfolios. To beat the rising costs of tuition, you can lock in rates at today’s levels through the Nevada Prepaid Tuition Program which offers a variety of payment options. For information on these investment vehicles go to www.nevadatreasurer.gov.

Grants, Loans and Scholarships

Offered by both governmental and private sources, grants, loans and scholarships are an important source of financial help for many students. Awards are based on criteria such as financial need, academic excellence, areas of interest and achievement in specific competitions. Because of the vast number of awards available, it’s best to start a search with your high school counseling office and the financial aid department of your local college or university. Before signing on the dotted line for any financial aid, however, it’s important to understand the obligations that might go along with it. Student loans must be repaid, which can place a large financial burden on the new college graduate. Grants and scholarships, however, are generally considered gifts that don’t need to be paid back.

With 75 percent of future jobs expected to require some type of certification or licensure in the coming years, the demand for higher education is expected to increase. In spite of rising costs, families can still provide the financial support needed to fulfill college dreams through precise planning and utilization of available resources. To better ensure you’ll have enough money at the time it’s needed, saving for college should begin when the future students are still very young.


Powered by Facebook Comments

This icon will be included whenever we link to a website that is not owned or operated by Nevada State Bank or Zions Bancorporation. These third-party websites are not affiliated with Nevada State Bank or Zions Bancorporation and may have a different privacy policy and level of security. Nevada State Bank and Zions Bancorporation are not responsible for, and do not endorse or guarantee, the privacy policy, security, accuracy or performance of the third-party’s website or the information, products or services that are expressed or offered on that website.