College Savings 101
Although learning may be happening differently these days, a college education remains personally and financially valuable.
But let’s face it: When the average cost of tuition adds up to $10,116 per year at a public university1 – $36,801 per year at a private one – it’s normal to question how you can pay for it. Whether you’re saving for your own schooling or hoping to help a child or grandchild, these life stage–specific tips can get you closer to your goals.
18 to 25 Years Old
Class credits. Tech devices. Housing. It adds up. Here’s how to rein in expenses and take proactive steps for your future.
Pay Down Interest
Even if you’re working and attending college at the same time, graduating debt-free isn’t guaranteed. If you’re still in school, it may make sense to at least pay down interest. That’s the money that accumulates on your loans while you’re in school. Your lender can explain how your loan works, as well as what options are available.
Explore Financial Aid & Scholarships
If you’re a current student, you may be eligible for grants, awards and scholarships. Try searching for opportunities around your unique qualities. Maybe a nonprofit you volunteer with offers a scholarship – or you’d like to challenge your writing skills in a scholarship essay contest. Your school’s financial aid office may also have suggestions.
Build Your Credit
As you start a full-time job and start making loan payments, you may decide to refinance. This can help you lock in a new term length, a lower interest rate or both. And potential lenders will want to see that you have good credit. Build your credit by making payments on time, limiting your credit usage, and maintaining existing credit lines.
26 to 35 Years Old
You’ve chipped away at that loan balance. But making the payments can be a balancing act when you’re trying to save during times of economic uncertainty. If you’re planning for a wedding, home, or graduate degree, consider this:
Change Your Mindset From 'Paying Down' to 'Paying Off'
Now’s the time to aggressively tackle your student debt. The sooner you pay off those loans, the faster you’ll free up funds. Reevaluate your budget. Explore refinancing options. Bump up your payments. All can help you work your way out of your debt obligations.
Turn Windfalls Into Wins
Cash gifts. Tax refunds. Work bonuses and wage increases. While you may be tempted to splurge, consider putting those extra funds toward your school loans instead. These windfalls – combined with the regular payments you’re already making – can help you zap debt that much faster.
Talk to a Financial Professional
Get a second opinion. If you’re looking to go back to school but concerned about your existing debt – or just want guidance on financial priorities – a financial professional can help. He or she can also explain various savings options to help you jumpstart a college fund if you have children or plan to start a family soon.
Your financial professional can also help you re-examine your current financial situation, establish a budget and help prioritize your expenses in order to help you accomplish your goals.
36 to 50 Years Old
You’re likely in the prime of your career. But you also may be considering going back to school. Here’s how to help find balance.
Refamiliarize With FAFSA
Remember that FAFSA form you filled out for your undergraduate studies? You can use it to apply for federal student aid as an adult student. There’s no age limit. And if you have a child already attending college, your federal student aid package will not impact their eligibility or amount of funding. Just know, there are very limited grants and scholarships available for graduate students (much different than undergrad studies) so make sure you plan accordingly.
Revisit Your Budget
Now’s the ideal time to zero-in on your household expenses. Search for places you can cut back if possible. Consider ways to boost cash flow – like taking up a side job.
Plan Ahead for Your Family
The earlier you start contributing to your child’s college savings plan, the better. If you haven’t already, explore vehicles for setting aside this money – like a 529 plan, Roth IRA, education savings account (ESA) or uniform transfer (UTMA).
51 to 64 Years Old
Every parent wants to help their child pay for college. But you have financial priorities, too – like your retirement savings. Keep in mind: Your children can borrow for their education. But you can’t borrow for retirement. If you can help your kids save without tapping those reserves, do this:
Review Your Account Options
529 plans. Education savings accounts (ESA). Uniform transfers (UTMAs). Roth IRAs. When it comes to saving for your kids’ college – there’s no shortage of plans available to help. Different account types come with their own benefits, tax impacts and qualifications. A financial professional can help you compare options to determine what works best for you.
Explore an Investment
Already taking advantage of an education-specific savings account? Consider saving additional funds in a lower-risk, higher-liquidity option like a money market account or certificate of deposit (CD).2
65 & Up
Establishing an educational legacy can be a generous way to support your grandchildren’s goals and learning. Here are a few options to explore:
Pay Tuition
You may be able to pay your grandchild’s tuition bill directly through the college he or she attends. The upside: It removes the need for a middleman – and exempts the amount of tuition from gift taxes. Just be aware that it may affect your grandchild’s financial aid eligibility.
Set up a 529 Educational Savings Plan
529 Educational Savings Plans are sponsored by states or educational institutions and let you set up an investment account to either pre-pay tuition costs at eligible colleges and universities or make tax-deferred contributions (known as a college savings plan) for tuition. These investment accounts are designed specifically for the qualified educational expenses of the child or future student, who is the beneficiary.
Buy a Savings Bond
A U.S. savings bond can be purchased online directly through the U.S. Treasury. Although different types have their own tax implications, they’re generally safe investments that can offer guaranteed interest if held to maturity.
Turn Ambitions Into Achievements
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Thrivent and its financial professionals do not provide legal, accounting, or tax advice. Consult your attorney or tax professional.
Offered through a brokerage arrangement with Thrivent Investment Management Inc. 529 college savings plans are not guaranteed or insured by the FDIC and may lose value.
Consider the investment objectives, risks, charges, and expenses associated before investing. Read the issuers official statement carefully for additional information before investing.
Investigate possible state tax benefits that may be available based on the state sponsor of the plan, the residency of the account owner, and the account beneficiary. Consult with a tax professional analyze all tax implications prior to investing.
1 U.S. News, 2018. "Average Costs of Attending College in 2018 - 2019."
2 CDs offer a fixed rate of return. The value of a CD is guaranteed up to $250,000 per depositor, per insured institution, by the Federal Deposit Insurance Corp. (FDIC). An investment in a money market fund is not insured or guaranteed by the FDIC or any other government agency. A money market fund seeks to maintain the value of $1.00 per share although you could lose money. The FDIC is an independent agency of the US government that protects the funds depositors place in banks and savings associations. FDIC insurance is backed by the full faith and credit of the United States government.
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