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Paying for College

Saving for College Month is September….

Updated September 5, 2022

While September is National College Savings month, saving for college isn’t a one month and done project…. It requires a long-term goal, a definite strategy and effort throughout the whole year. Whether you are a parent or a student, that likely seems a bit intimidating. How do you even know where to start?


The good news – Paying for college isn’t just on the parent’s shoulders.  According to the Education Data Initiative1:


– 84% of college students receive some form of financial aid

– Scholarships and grants cover $7,500 of annual academic costs per student

– Student income and savings cover 8% of education costs


Best Way to Pay for College


Like any large expense or purchase, you should plan to spread your college costs out over time. Financial Advisors recommend planning to pay for college with one third of the cost coming from current income, one third from loans and one third from saved money.2 For savings, the longer time from starting to save to finishing college, the greater the benefit.  To see how much consistently saving even a small amount monthly grows to over time, try playing with this simple, compound interest calculator.


Why 529 Plans?


According to Forbes,2 529 plans offer the best opportunity to save and pay for college. Earnings accumulate on a tax-deferred basis and are entirely tax-free if used to pay for qualified higher education expenses. If a 529 plan is owned by a dependent student (a custodial 529 plan) or the dependent student’s parent, it is reported as a parent asset on the Free Application for Federal Student Aid (FAFSA) and distributions are ignored. These plans have generous contribution limits and do not have income restrictions.


Some plans only require a monthly deposit of $25.00, so if you can afford to save something, you should, and the earlier your start the better. When saving for college, every bit helps over the long-term. Use this great Vanguard calculator to figure out what you might need to cover for college.


Other Paying for College Strategies


In the end, there are many other strategies to pay for college including using part of your home equity and state, federal and private student loans. Just remember, a little bit goes a long way.  Even starting to save a little bit monthly in a 529 plan or paying for college while in college will reduce what gets taken out in loans. When September ends, saving for college continues.



1 Hanson, Melanie. “How Do People Pay for College?” April 23, 2022

2 Kantowitz, Mark. “What Is The Best Way To Save For College? 529 Plans.” December 16, 2020