Saving for College

Paying for an education after high school requires planning. While your college years may seem far away, you will be better able to meet the challenge of rising college costs if your family starts planning today. Saving some money can drastically increase your school options while decreasing your need to depend on student loans and other financial aid. Think about savings as a down payment on your education, even if it won’t be possible for you to save enough to cover all your school costs.

It is a common mistake to think that saving money will prevent a student from qualifying for financial aid. It is true that the Free Application for Federal Student Aid (FAFSA) asks you to provide information on savings and other assets, which are used to determine financial aid eligibility. However, calculations consider the age of the parents and their need to save for retirement. Remember, any savings will help reduce the need for borrowing money, a situation which requires years of repayment.

Once you've determined how much to put away, you need to decide where it should go. Opportunities for investing your money are numerous and varied. Begin thinking now of the investment portfolio that will help you earn at least a portion of what is needed for your education.

Listed are savings options to consider:

• College SAVE – North Dakota's 529 College Savings plan helps families invest for future college expenses by allowing contributors (parents, grandparents, aunts, uncles, etc.) to deposit funds into an account on behalf of a designated beneficiary. Funds can be used to cover qualified higher education expenses incurred while attending an eligible institution. The programs also offers a state tax deduction on contributions for North Dakota residents, federal and state tax-free growth on earnings for qualified expenses, a matching grant program, and many investment options.
• Certificates of Deposit (CD's) – Issued by insured financial institutions who pay fixed rates of interest for specific periods of time. These are considered safe investments.
• Series EE Savings Bonds – Issued by the U.S. government. Income from these bonds bought after 1989 are tax exempt if used to pay for college tuition and fees. For more information, consult your tax advisor or visit the U.S. Department of Treasury.
• Regular Savings Account – Monthly contributions into these accounts are one of the most fundamental methods for building financial reserves.
• Education IRA's & Mutual Funds – These types of investments should be discussed with an investment broker.