Get in on a good thing

Financial planners say when it comes to saving money, people generally procrastinate.

Here’s a good example: A recent poll of parents – all of whom had at least one teenager – found that nearly a third of the adults hadn’t saved any money for their child’s college education.

Today, four years at a public in-state college, including room and board, costs about $50,000; private colleges may cost double that or more, according to the College Board.

Now for the good news: To help families sock cash away for college, every state now offers a relatively simple, tax-deferred savings program, called “529 plans” after section 529 of federal tax code under which they’re reported.

There are two varieties of programs: Pre-paid tuition plans, like the one sponsored by the state of Washington, and college savings plans, like Idaho’s.

Both garner high marks for being easy to use, cost effective and well managed, according to Savingforcollege.com, a Web site that rates all the plans.

Washington calls its plan the Guaranteed Education Tuition, or GET, program. Idaho offers the Idaho College Savings plan, dubbed the IDeal program. Both started in the late 1990s.Among their attributes:

You pay no taxes on the account’s interest earnings.

You control the account, not your student.

Anyone may contribute to the child’s account.

Unlike some savings plans, there are no income limitations of those opening accounts.

Most states have no age limits on when students must use the money.

If your child decides not to go to college, you may roll the account over to another member of your immediate or extended family or use it for your own education.

The federal financial aid system considers parent-owned 529 plans as parental assets, just like savings accounts, when determining a student’s financial aid eligibility.

Idahoans may annually deduct on their state income tax returns contributions of up to $4,000 individually or $8,000 jointly.

Distributions may be used for eligible expenses, which include tuition, fees, room and board, books, some supplies and enrollment charges.

The funds may be used at any college, university, vocational school or other postsecondary educational institution that participates in the U.S. Department of Education’s financial aid program. Some Canadian and numerous overseas universities participate in the program, too.

Now a bit of potentially bad news: The tax-free status of withdrawals is set to expire in 2010. Congress will decide whether to extend the benefits.

Spokane Valley residents Gary and Carolyn White opened GET accounts for their two sons, 19-year-old Andrew and 15-year-old Austin, shortly after the program opened in 1998.

Andrew will earn an associate’s degree from Spokane Community College in June. An aspiring commercial pilot, he’ll transfer a few weeks later into the flight technology program at Central Washington University in Ellensburg.

“We’ve used this program to finance all of Andrew’s tuition and fees so far,” Gary White said. “I like the simplicity of it.”

He especially likes that he conduct his transactions online, he said.

“I indicate what term my child will be attending what school. When that tuition comes due, I go online and indicate how much I want deducted to take care of those costs – and it’s taken care of,” said White, program director and professor of Spokane Community College’s respiratory care program.

“With the pre-purchase plan and with tuition going up 8-12 percent a year, what other investment can you make that has that kind of return?” he said.

Washington’s GET program is based on a unit system — 100 units covers a year’s in-state tuition and fees at the state’s most expensive public university, typically Washington State University in Pullman or the University of Washington in Seattle.

Today, each unit costs $66, which is 1 percent of residents’ annual undergraduate tuition and fees.

The state guarantees that when your youngster is ready to attend college, 100 units will cover tuition and fees for an academic school year, regardless of how much tuition has gone up since you purchased the units.

Those who study at community colleges or technical schools will fork over even fewer units since smaller schools charge less than bigger ones.

Tuition at the state’s public colleges has risen an average 7 percent annually over the past 24 years, said Betty Lochner, director of the Olympia-based GET program.

There is a residency requirement. To enroll in the GET program, either the account owner or the student beneficiary must live in Washington.

“More than 57,000 accounts have been opened since 1998. This is our eighth enrollment year and the program’s value exceeds $650 million — $52 million of that is from investment returns,” said Lochner.

“For the second year in a row, the GET program is the fastest-growing prepaid tuition plan in the nation, based on population,” said Lochner.

It pays to start saving early.

“The younger your child is when you open the account, the bigger bang you’re going to get for your buck. Right now, you could buy 400 units (four years tuition and fees) for $223 a month for a newborn. But if your child is only 10 years away from college, the monthly price would go up to $315,” she said.

Idaho’s IDeal program centers on savings plans administered by TIAA-CREF Tuition Financing Inc.

“The best 529 college savings plans for the state’s residents are all of the TIAA-CREF plans,” according to Savingforcollege.com.

Three investment choices are available, each varying in risk and returns. Performance histories are available at www.idsaves.org/invest_results.htm.

Special provisions allow one-time annual contributions of $11,000 from individuals or $22,000 from a married couple free from federal gift tax.

Total account balances max out at about $310,000.

Washington State University senior Jenny Bengeult said she’s grateful her family had the means and the foresight to open a GET account for her and younger brother.

“All my friends are graduating thousands of dollars in debt and I’m able to start fresh and that’s great. I’m very thankful. It sort of puts me ahead of the rest. I’ve got one less financial burden to worry about,” said Bengeult, who’s on track to graduate from WSU in May with an interior design degree.