Protect Your Pockets Series

Saving for College

(originally published April 2010)

While students across Indiana are looking forward to the end of another school year, many parents are finding themselves another year closer to paying for college. According to The College Board, the average yearly tuition at a public university is $7,020. Many Hoosier parents are asking themselves, how can we afford this?

Time and consistency are important factors when saving for anything, and college is no different. The earlier you start saving and the more often you save, the better off you’ll be in the long run. You can start by opening a savings account dedicated to this purpose. Determine how much of your monthly budget you can realistically contribute and commit to saving that amount each month, no matter how small an amount it is.

Some people turn to investing to help save for college because your money can sometimes grow at a faster rate than with a traditional savings account. There are a variety of investment products available.

One designed specifically for this purpose is Indiana’s College Choice 529 Plan. You can open an account for as little as $25 and can earn an income tax credit of 20 percent of contributions to your 529 plan, up to $1,000 per year. There are a range of investment options for your 529 plan. For more information, visit

If you’re interested in other investment options, consider working with a licensed professional such as an investment adviser or financial planner. Make sure the person is licensed and registered by using the searchable databases or by calling my office’s Securities Division at 1-800-223-8791.

In addition to long-term saving and investing, students can help pay for college through financial aid, scholarships and/or grants. The amount of aid awarded is typically based on income level and the cost of the school. Prospective students can apply for federal aid online at Students should also check with the Department of Financial Aid at the school they are applying to for additional assistance and/or scholarship opportunities.

One final way to help pay for college is through student loans. They are useful because you aren’t required to make loan payments until a certain period of time after the student graduates (typically six to nine months). However, it’s important to remember that loans only provide temporary relief, and if you don’t repay them when the time comes, it can have serious financial consequences such as negatively impacting your credit score.

When applying for student loans, avoid borrowing more than you need and only use it to pay for school expenses like tuition, room and board and books. Also, pay attention to the interest rate and whether or not the loan is subsidized or unsubsidized. The federal government pays interest on subsidized loans while the student is still in school, however with unsubsidized loans, you start accruing interest from the time you receive the funds.

If you’re a parent with a younger child and aren’t sure how to start saving for college, visit The Indiana Youth Institute for a step-by-step guide to the college planning process. The site has a timeline with financial planning tips for every age. Even a small amount of saving early on can have a big impact when your child is ready to graduate and head to college.

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