Money Matters: The Old College Try Saving for your kids' education

collegefundJenny Diener-Grille of Pikesville has seen friends and family alike graduate from college and struggle to keep up with student loan payments, drowning in thousands of dollars of debt.

So Diener-Grille, 46, wants to help her three children — who range in age from 11 to 14 — avoid a similar fate when it comes time for her to send them off into the world of higher education.

“Coming out of college, a lot of my friends and their kids are in no position to pay off that kind of money if they have to,” said Diener-Grille, a psychologist. “It should be a time they set out to enjoy everything the world has to offer, not constantly worry about this massive obligation they have looming over their heads.”

After her youngest was born in 2001, Diener-Grille started contributing several hundred dollars yearly for each in a T. Rowe Price 529 plan, which is a tax-advantage savings account intended for education expenses. With her oldest son, Brenden, 15, interested in studying law, Diener-Grille said she and her husband plan to start saving even more in the coming months.

Diener-Grille is just one of many families who find themselves in a similar situation trying to salt away as much money as possible to ease the burden of college expenses on their kids.

According to the seventh annual study released in May by College Savings Foundation, a Washington, D.C.-based nonprofit organization, 60 percent of high school students have started to save for college, the highest level since 2010. The survey also found that 62 percent of parents are saving as well.

Stephen Goldstein, senior vice president at Baltimore-based Scheinker Investment Partners of Janney Montgomery Scott LLC., said it’s never too early for parents or teenagers to put money aside for educational purposes. Even putting in as little as the minimum $25-per-month minimum, or a one-time $250 deposit a year, into a T. Rowe Price 529 adds up over time.

“I think parents understand that college is substantially more than it was for them,” Goldstein said, “and I think they want to provide their children with the best educational experience possible. It’s one of the reasons I think parents start saving so early now, so I think it’s pivotal that there is a structured savings plan in place for them.”

Goldstein, who said his 15-year-old daughter and 13-year-old son are starting to look at colleges, also invests in the T. Rowe Price 529 because of the various benefits it offers. Savings from the plan can be used at public, private or technical colleges around the country for things such as tuition, fees, room and board, books, and course-related materials and supplies.

Another plan Goldstein believes is worth looking into, depending on your family’s financial situation, is a Coverdell Education Savings Account, which is very similar to the 529 plan. One of the biggest differences between the two, however, is that Coverdell ESAs have an age limit of 30 years old, making it a less viable option for those pursuing master’s and doctoral degrees. There is no age restrictions for the 529 plan.

But despite their best efforts, many are still having a difficult time meeting the demands of increasing tuition bills.

Jenna Frits, a sophomore at Towson University, said she started preparing for her college future when she started high school by opening a savings account with her local bank. When she is not in class, Frits works two part-time jobs so that she can pay as much on her loans as her financial demands permit.

“I know that I’m going to have to pay no matter what,” Frits said, “so I’d rather just pay as much as I can now. It’s not worth delaying and making an even bigger hole for myself somewhere down the line.”

Financial advisors associate cases like Frist’s to larger issues that come with paying to attend a four-year institution.

“Eventually, what’s going to happen is because the cost of college is expanding so fast, it’s making it unaffordable to families who don’t have the resources to put their kids through college,” Goldstein said.

To combat that, there are some alternative options you can consider to alleviate some of those financial pressures. Many local organizations provide scholarships, and public state universities often provide cheaper tuition for in-state residents.

Diener-Grille said she has thought about sending all three of her kids to attend a less-expensive community college for two years while knocking out all their general education requirements. Then, the plan would be for them to enroll in a four-year instiution once they have decided which field they would like to pursue.

“I can, literally, save thousands of dollars in those first two years without there really being a difference in the courses they take, so why not do that? Even if they have figured out what they want to do, they could end up changing their minds,” Diener-Grille said.

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