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Planning for future

(September 1, 2020) - It’s September, and in a routine world, that means students are heading back to school. But as we’re all aware, in the age of COVID-19, this is no routine world.

Many school districts and college campuses have altered their plans for student attendance, going “virtual” because of the Coronavirus pandemic. Some are still standing by the traditional face-to-face classroom model.

As of this writing, there may still be a college football season of some kind. Or, there may not be. That alone could be the deciding factor for many students still on the fence over whether they will live on campus or at home this fall.

In the midst of all this uncertainty, here’s one undeniable truth you can still count on: September is National College Savings Month. With Back to School top of mind for most students and parents, this is an ideal time to establish a habit of saving and investing for your child’s future education.

Nearly every state in the U.S. offers some form of 529 plan: either a prepaid plan, an investment plan, or both. 529 plans are tax advantaged, in that growth and withdrawals are free from federal taxes when used for qualified higher education expenses like tuition, fees, books, computers, and even some living expenses. In addition, 34 states including the District of Columbia offer a state income tax benefit.

In terms of simple math, saving for higher education over time makes infinitely more sense than borrowing and paying it off later. It boils down to this: when you’re saving, your money earns interest; when you borrow, you’re charged interest. At today’s interest rates, saving $100 a month over your child’s first 18 years will result in an accumulation of nearly $40,000 on just $21,600 in savings. If you were to take a student loan for that same $40,000 at a competitive 4% interest rate,’s student loan calculator computes your payment at more than $240 a month for 20 years, for a total repayment of more than $58,000. Clearly, the old adage, “Saving a dollar today is better than borrowing one tomorrow” is true.

Although 529 plans were established with college costs in mind, the trend in recent years shows many students opting to skip college in favor of more specialized vocational training. To that end, the Setting Every Community Up for Retirement Enhancement (SECURE) Act, signed into law last December, adds the cost of apprenticeships and student loan payments to the list of qualified expenses.

2020 is shaping up to be one of the most volatile and unpredictable years on record. One way you can provide a little stability to your child’s future education plans is to save with a 529 plan. National College Savings Month is a great time to get started.

Unsure which plan is best for you? Clarify your options using CSPN’s plan comparison page.