Parents unwilling to face reality of saving for college

Skyrocketing college costs and media coverage of student loan debt cement the perception of a national education crisis. The current average debt U.S. graduates leave college with is about $24,000, according to college planning nonprofit group American Student Assistance. Although most agree that a college degree is important, many middle- and lower-income families are paralyzed by college sticker shock.

Julie Shields-Rutyna, director of early college planning with the Massachusetts Educational Finance Authority, a Massachusetts nonprofit group that offers two of the state’s 529 college savings plans, has seen more than her share of parents who feel helpless when it comes to saving for their children’s college education.

But she and others, such as Nevada State Treasurer Kate Marshall, think today’s parents need to, above all, view saving for college as an opportunity to reduce the debt burden for their children.

“If you’re just able to help them graduate with a manageable debt behind them, something they can pay back and still have money to live life, that’s very important,” Shields-Rutyna said. “I see people stress about how much to put in and so they don’t start. Even if it’s $15 a month, just start.”

Silver State kindergartners

Armed with a study by William Elliott, a researcher with the New America Foundation, who found children with even meager savings of $500 or less are far more likely to attend college, Marshall’s office has been chasing down grants to help Nevada kindergarten-age children open $50 college savings accounts. The accounts will hopefully get parents over the hump with how and when to start saving and help kids see an investment in them that encourages them to pursue college.

The program, called Nevada College Kick Start, will roll out in rural Nevada in the fall, thanks to a $20,000 grant from Charles Schwab. Marshall is also pursuing a $50,000 federal grant for Clark County.

“Here’s what happens: A child is born and people realize children are expensive. People realize all that free money every month is gone. But then the child stops day care and a bucket load of money opens up. That’s the moment I’d love to capture that parent and say, ‘Let’s put some money in that college savings,’ ” Marshall said. “My hope is that in 12 years we’ll see this was a game changer.”

Resources, the 529

The 529 plan (named after the IRS tax code) is the best known college savings program. Forty-nine states and the District of Columbia administer them, as well as other nonprofit groups such as the Massachusetts Educational Finance Authority and financial advisement groups . They work like 401(k)s and are tied to investment options. All of the money deposited into them, including interest earned, is federal income tax-free as long as the withdrawals go toward qualified college expenses.

Some plans are strictly for tuition, others allow funds to go toward housing and other fees. A prepaid tuition 529 Plan, for example, sets aside savings for tuition expenses. The benefit is locking in your state’s current tuition rates for the time your son or daughter attends college.

Most prepaid plans offer flexibility if a child wants to attend an out-of-state school . But parents must look closely to see which schools are participating in that state’s plan. Under a prepaid plan, the administrator invests the money through the years in hopes of making up the gap between today’s tuition costs and the future cost. It’s a risky proposition, Marshall said. There were 22 plans across the country at the start of the recession; half have dissolved. Nevada’s is 104 percent funded, Marshall said.

In addition to Nevada Prepaid, the Silver State also offers the SSgA (State Street Global Advisors) Upromise 529 Plan Account, the Vanguard 529 College Savings Plan and the military-geared USAA 529 College Savings Plan. There is also the Putnam 529 Plan, which is sold through private financial advisers. Some plans can open with a $50 deposit, others may have higher starting minimum .

For more information about the 529 plans, visit (and experts say, thoroughly read):, and The Saving for College website also has tools that look at 529 plan fees and rate individual plan performance. It is not uncommon for families to invest in another state’s plan, if they see a better return, then, if the plan allows for it, use the funds toward a school in a different state or even their home state.

Both Marshall and Shields-Rutyna say getting relatives involved can help, too. Under the Upromise credit card program, shopping at certain merchants or at certain places such as grocery stor es and gas stations can give small percentage rewards for purchases. The credit cards can be tied to the 529 account where rewards dollars can be deposited. Relatives can also have their rewards credit cards tied to their grandchild’s or niece’s or nephew’s 529 account and boost the savings .

Marshall also highlights the state’s matching grant offering for its USAA and SSgA programs. For families whose gross adjusted annual income is less than $75,000, the state offers a match of up to $300 per year with a maximum benefit of $1,500.

Scholarships, being real

Your child’s extracurricular activities could pay off, too. If he or she is driven to excel in a certain sport or activity, that could be the platform for a scholarship. But there are numerous other financial aid options such as Pell Grants for low-income families and work-study opportunities, according to Tamara Krause, a spokes woman for Some parents have even used crowd-sourcing efforts such as, the expert said.

“It’s important that parents understand that there are resources to help, even when they cannot,” she added.

Krause advised people to start local when looking for financial aid. Talk to the school guidance counselor, local churches, banks or nonprofit groups that may offer assistance. Certain employers may offer tuition reimbursement options. Krause also said registering with several free online scholarship search services is key. Better ones require an extensive profile of you; poorer ones only ask for a few pieces of information.

“Although it may take 10 or 15 minutes to complete the registration, it could save students from wasting several hours of their time sorting through awards that they are not eligible to receive,” she added.

Krause recommended Reddit, Pinterest, Tumblr and Twitter to help locate opportunities.

“It’s important that students don’t have the ‘one and done’ mentality, though, as new scholarships pop up every week. Students need to check their resources at least once a month to see what may have been added,” she said.

“There literally are scholarships for just about everything, including merit (grades), need (income), sports, talent (art, music, drama), creative writing and even some weird ones, like scholarships for being a natural redhead, making your prom outfit out of duct tape and surviving a zombie apocalypse!”

Krause also emphasizes the importance of having candid conversations with children early on about how much a parent can and can’t afford.

“It can be gut-wrenching to tell a child he/she cannot attend his/her dream school because the family cannot afford it, but it’s better to know this before the college application process begins,” she added.