The College Savings Chill Out Presented By T. Rowe Price. Invest With Confidence.

Everybody stresses about saving for college. But it's going to be okay. Even saving a little bit can help in the long run. The most important thing is to make a plan and get started. That's where a 529 college savings plan comes in.


Step # 1
Be realistic. Have a plan and do
what you can.

You’ve probably done a little investigating about how much tuition will cost when your child is ready to go to college. If you have, you don’t need to feel bad if the number seems scary. It does to everyone. The first thing you need to do is repeat this to yourself, “I don’t need to save it all.” Really, do that right now. Because that’s the honest truth. Instead of making the total number your enemy, make your personal goal the hero. Maybe you save for two years of school. Or just one. The reality is that you may only be able to save for a portion of your child’s college expenses. And that’s fine. Saving for any part of your future college graduate’s expenses will help them a ton in the long run.

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Step1 speech bubble We don’t need to save it all.
Let’s set a goal.
We can always change it later.
Step1 speech bubble2 Plus every dollar we save is
less we may have to borrow.
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Step # 2
Just get

That sounds overly simple. And that’s the idea. Starting with something manageable now may help save a lot of money and frustration in the future. You can’t bank on the fact that your child will qualify for financial aid or get all those scholarships that sound so good. Saving now will save you from spending a lot on loans down the road. So getting started now is the smart thing to do.

Saving actually saves you money.

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a month now for 18 years

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a month after graduation for 10 years

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If you save about $70 a month for 18 years, you can get to an out-of-pocket investment of around $15,000. When you add potential earnings to that amount, you could end up having around $25,000 toward college costs.1

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On the flip side, if you borrow $25,000, you’ll have to pay about $320 a month for 10 years. That will include about $13,000 in interest over the life of the loan. That means you’ll pay around $38,000 out of pocket for $25,000 in college expenses.2

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If you save about $70 a month for 18 years, you can get to an out-of-pocket investment of around $15,000. When you add potential earnings to that amount, you could end up having around $25,000 toward college costs.1

On the flip side, if you borrow $25,000, you’ll have to pay about $320 a month for 10 years. That will include about $13,000 in interest over the life of the loan. That means you’ll pay around $38,000 out of pocket for $25,000 in college expenses.2

  • 1. Assumes a 6% annualized return
  • 2. Assumes an interest rate of 8% annualized. Total loan period is 14 years: 4 years in college plus 10-year repayment period.
  • This depiction is for illustrative purposes and not representative of any particular investment or loan, and does not consider any investment or loan origination fees. Amounts reflected are adjusted to “today’s” dollars and assume an inflation/discount rate of 3% annualized.

If you were the scholarship committee,
your child would win them all.

But because you aren’t, think of scholarships as a bonus.
When it comes to talking about money, we can’t help but want to stick our heads in the sand and think, “It’ll all work out for the best.” But let’s be frank for a minute. Even though scholarships are always a possibility, it’s better to think of them as an added bonus and not a given. Even if your child gets a scholarship, it likely won’t be a full ride. That’s out of your control. So it’s best to take control of what you can and start preparing for how you’re going to pay.

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You can’t predict the future.

But you can take control of it.
Waiting to use financial aid is kind of like leaving your child’s college education to chance. Federal loans may not be there in the future. And if they are, there’s no guarantee that the interest rate will be one you can stomach.

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Meet A New Friend:

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A 529 plan allows you to save money for future education expenses like tuition, fees, room and board, books and supplies. When you save, and use it towards qualified educational expenses, you don’t have to pay tax on any earnings. That means you could have more tax-free money to use towards college with a 529 plan. And really, who doesn’t want more money to use towards college?

Please note that the availability of tax or other benefits may be conditioned on meeting certain requirements such as residency, purpose for or timing of distributions or other factors as applicable.

Just pick a dollar amount.


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Don’t get paralyzed by how much college may cost. It’s important to put time on your side. Then you can set a good pace for contributing over the years. With more time, you also have the potential to earn more on your investment. Every dollar saved today is one less dollar you’ll have to borrow later. And think about this. Your potential earnings could give you even more dollars you don’t have to borrow. $1 saved today could mean $2.85 you’ll have later (assuming 6% earnings over 18 years). In other words, that could be 185% more to use towards college than what you invested.

All figures assume a 6% hypothetical rate of return compounded monthly. These examples are for illustrative purposes only and do not represent the return earned by any specific investment options. Investment returns will vary and may be higher or lower than in these examples.

Step # 3
You don't have to do this alone.
Get others involved.

We’ve all got a lot going on. Finding $100 or even $50 a month can be tough. So think about what’s going on in your life and the people in it, and figure out a plan that works for you. Here are some thoughts to get you started.

Add to your 529,
Not to your clutter.

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When friends and family ask for gift ideas, suggest that they give to your child’s college savings plan. After all, there’s always room in your 529. But in your closets? That could be another story.

Talk to Grandma & Grandpa

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They’d probably like to help. Grandparents can also contribute to your 529 through gifting. Or they could open their own accounts for your child. There are estate planning and gift tax advantages associated with opening a 529, so they should speak with a tax professional. No matter how Grandma and Grandpa help, just make sure you know how they’re contributing and how much, so you can consider that in your overall plan.

Bonus time? Bonus!

Take 10% of your bonus or your tax return and put it towards college savings. It may seem tough at the time, but it’ll help pay off in the long run.

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A new principle to live by:

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If your child gets money from gifts, babysitting, mowing lawns or an allowance, have them save 1/3 for college, give 1/3 to others and use 1/3 for fun.

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Save at milestones along the way.

Childhood is full of milestones. So think of your 529 like it’s growing along with your child. When you stop paying for diapers, take that money and put it into her 529. When she goes to kindergarten, contribute the money you would have spent on daycare to her college savings plan. While there will always be new things to pay for, try to make each milestone in your child’s life one in the life of her 529 as well.

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Step # 4
Make your 529
work for you.

We mentioned a new friend, the 529. Now let’s spend some more time getting better acquainted. The whole point of a 529 college savings plan is to give you flexibility, while also helping your money work harder for you.

Use savings at colleges nationwide.

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The money you save can be used for qualified private or public colleges, universities and graduate schools, as well as vocational and trade schools anywhere in the country. Some international schools qualify as well.

The name on the account
isn’t set in stone.

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You can use the money in the account for any of your children. If your child turns out to be a rocket scientist and earns a full ride to college, you can transfer the savings to another child. Or you could even use the money to start your own second career. Hello, culinary school.

Pay less in taxes

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Depending on your state, you could get major tax benefits just by contributing to a 529. Some states offer tax benefits for investing in any 529 plan. That allows you to really explore your options and choose a plan that’s best for you. And if your state offers a deduction for contributions to your 529, that could increase your tax refund by a couple hundred dollars. Putting that money back into your 529 could really add up over the years.

Just to Reiterate.

You don’t have to pay taxes on what you earn.

If you’re planning to buy stock here and there to save for college, you’ll have to pay taxes on what you earn on that stock. In a 529, you don’t have to pay for money that’s earned from investments when you use it for qualified higher education expenses. This makes 529 plans the option that could give you more money to use when it comes time for college, because you keep more of your earnings by not paying taxes. And really, who doesn’t want to have more money for college?

Step # 5
Take care of life's necessities.
Give a little to each.

We get it. If you could only focus on saving for college, you absolutely would. But there’s a lot going on in your life that demands attention from your wallet. Start by setting your priorities and fund them that way. If sending your child to a private four-year college is your goal, start there. Just make sure to always remember Step #1: be realistic. It's all about trade-offs. Even small trade-offs. Maybe you go for a slightly less expensive car or home so you can put the extra money into your 529 and IRA. And keep in mind, as things in your life change, you can adjust with them.

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Remember to look after yourself as well as your kids. If you haven’t already started saving for retirement, now’s the time. Look into your company's retirement plan or set up an account like an IRA for yourself. And if you're not sure how much to save for retirement, consider a target of 15% of your salary each year.

Step # 6

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As you start thinking about saving for college, don’t worry, there's someone who understands and can help. At T. Rowe Price, we’re experts at that. Starting an account can be easier than you think. We’ll begin developing your plan with three pieces of information:

  • The age of your child(ren)
  • What state you live in
  • How you'd like to contribute (lump sum or automatic)
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The T. Rowe Price College Savings Plan is offered by the Education Trust of Alaska. You should compare this Plan with any 529 college savings plan offered by your home state or your beneficiary’s home state and consider, before investing, any state tax or other state benefits, such as financial aid, scholarship funds, and protection from creditors that are only available for investments in the home state’s plan. Please read the Plan's Disclosure Document which includes investment objectives, risks, fees, charges and expenses, and other information that you should consider carefully before investing. For other important legal information, please read the Plan's Privacy Policy. T. Rowe Price Investment Services, Inc., Distributor/Underwriter.