Attend a 529 college savings talk, leave with a $25 account

One factor can make a child seven times more likely to attend college: having a college savings account in their name.

“That’s across all socioeconomic lines. It doesn’t even matter how much is in the account, just as long as they have one,” said Melissa Marshall, an employer plan adviser at CollegeInvest.

Employee Services will host talks about CollegeInvest’s 529 college savings accounts on each CU campus starting Aug. 16, with lunch provided at all sessions. CollegeInvest, a nonprofit division of the Colorado Department of Higher Education, is dedicated to breaking down the financial barriers to attaining post-secondary education through tax-advantaged savings accounts, scholarships and matching grants.

The talk will outline costs of college, the advantages of saving through a 529 account and how to enroll.

Marshall starts the discussion with an overview of college education costs in-state, out-of-state and at private colleges, and gives 5-, 10- and 18-year cost projections for each. She presents information on the overall savings realized by borrowing versus saving to pay for an education. Quick teaser: CollegeInvest estimates saving in advance can reduce the overall cost by half.

That’s where 529 accounts come into play: These tax-advantaged college savings accounts allow account owners to set aside money for a beneficiary. Typically, this is a parent or grandparent saving for a child or grandchild, but it’s not uncommon to be your own beneficiary. Accounts are free to open, there’s no annual fee and you can deposit money as you see fit.

Colorado is one of a few states to give residents a dollar-for-dollar tax deduction on their contributions – with no limit.

“If you make $50,000, you could deduct the entire $50,000 on your state income taxes,” Marshall said. “It’s a great benefit.”

When the beneficiary is ready to use their 529 account, they can do so at a university, community college, trade school or vocational school in almost any state or country.

“Really, the bottom line is, if the institution you are attending accepts federal aid, they will take your 529 dollars,” Marshall said. “I’ve known people who’ve used it to get their yoga certification. I know someone who’s using it to get their brewmaster’s certification.”

The qualified educational expenses don’t end at tuition, room, board and books. Money can cover expenses such as transportation to school; required equipment like laptops, WiFi or art supplies; or even for room and board if the student lives at home. Withdrawals are self-reported, but CollegeInvest strongly encourages users to save all receipts.

If, for some reason, your beneficiary doesn’t go to college, the beneficiary can be changed. If that’s not an option, the account owner can withdraw the money, paying taxes on interest earned and a 10 percent penalty on that interest, Marshall said.

For lower- to middle-income families, matching grants and scholarships are another advantage to opening a 529 savings account. For children 12 and under who qualify, a matching grant will pay up to $400 a year for five years. Qualifying high school graduates can receive a $2,000-per-year scholarship for four years. Both are funded by CollegeInvest partners Vanguard, Legg Mason, MetLife and First Bank.

“You don’t have to write essays. You don’t have to do anything other than be a CollegeInvest account owner and meeting the financial considerations of what’s considered middle-to-lower income,” Marshall said. “If you have both those things, you are guaranteed to get the grant and the scholarship.”

Getting started is the most important thing, Marshall said. With that in mind, CollegeInvest is putting its money where its mouth is: Each person who attends the campus 529 talks will receive a $25 starter account for each of their beneficiaries.

“That’s per account opened,” Marshall said. “If you have three kids and you open three accounts, we’ll put $25 in each account for them.”