COLORADO SPRINGS – Parents know: College is expensive. Most families can’t afford the huge cost up front, even with savings, and student loan debt is growing out of control.
State lawmakers hope to give Colorado families a head start with the new kickstarter law. What the law does and how 529 savings plans work in this 360° Perspective.
For the 2017-2018 school year, the average cost for an in-state public college was nearly $10,000. It grows to more than $25,000 a year for out-of-state schools and nearly $35,000 for private institutions. These numbers are from The College Board.
The kickstarter law will give every child born or adopted in Colorado $100 to go towards a 529 college savings plan. It takes effect on Jan. 1st, 2020.
The $100 will be adjusted for inflation each year until 2040. The funds come from the “College-Invest” program which already exists under the Department of Higher Education. If funds fall short money can be moved from the scholarship program or matching grant program. The state treasurer can also pursue donations.
The state estimates this plan will cost anywhere from $200,000 to $3.4 million based on population trends.
Parents have to take action to get the money from the state. They do that by opening an eligible college savings account for their child within 5 years or the money will be lost.
There are more than 13.5 million 529 plans according to the College Savings Plan Network.
There are two types of plans: Prepaid tuition or education savings.
According to the Securities and Exchange Commission:
-In a prepaid tuition plan, you essentially buy credits at participating colleges or universities. Money goes toward tuition or other mandatory costs, but not room or board.
-In an education savings plan: the investment account can be used for tuition, fees, room and board, and can be used at most colleges or universities. They aren’t just for higher education either. They can be used up to $10,000 a year per child for tuition at private elementary or secondary schools.
The plans may have fees but many also have tax benefits.
For some extra perspective here on the massive cost of college, according to nitrocollege.com:
-Americans own more than $1.5 trillion in student loan debt.
-1 in 4 Americans or nearly 45 million people have student loan debt.
-The average debt is more than $37,000 or about $400 a month, and it takes about 20 years to pay off the loans.
Do you have a college savings plan or debt you’re still paying off? Sound off on our social media pages.
And if you have an idea for a future 360° Perspective email email@example.com
This report was produced with the help of Monica Gouty.