As parents, grandparents and students we know college is coming and that we're somehow going to have to pay for it someday. Fortunately we have many options available to us including savings bonds, the stock market and 529 plans. Starting a 529 account now is always the best option, no matter how old you (or your child) is. While playing the stock market may yield higher returns on your investment, placing your money into a 529 plan allows it to grow in a tax free environment. One study even found that when the federal tax benefits were taken into consideration, 529 plans outperformed their benchmarks in every category.
Louisiana has it's own state-operated 529 plan called START Savings Program. It is important to note that your child does not have to go to a LA college or university in order to use this savings account. 529 plan funds can be used at any accredited college or university across the nation, including some K-12 private schools!
Colleges and universities across the United States experienced increased operating costs of 2.5% in 2019. This most recent inflation figure was down slightly from the 2.9 percent increase in 2018 and 3.4 percent increase in 2017. These costs are forwarded directly to students in the form of higher tuition and living expenses. As these costs steadily rise every year, parents are looking for ways to help offset these future higher education costs.
These rising costs are hitting closer to home in Louisiana as well. Louisiana's' higher education costs rose by 106.9% in just the last 10 years, ranking as the 1st highest state.
The table below shows the average one-year costs in 2020 for different types of LA colleges and universities.
|Ownership||Degree||Schools||Public Out-of-State Tuition||Public In-State Tuition||Median Debt||Total Annual In-State Cost|
These costs rise every year. Rising tuition is a major driver in these increased higher education costs. Tuition at a 4-year university in LA rose 31% (ranked 2nd worst in the US), while a 2-year or trade school increased their tuition by 16 percent.
Louisiana offers tax benefits and deductions when savings are put into your child's 529 savings plan.
|For single filers:||$2,400/yr per beneficiary|
|For joint filers:||$4,800/yr per beneficiary|
Louisiana’s 529 college savings plan is subsidized by the state, resulting in no costs to the participant above the underlying fund expenses. However, only those meeting Louisiana residency requirements may participate in this 529 plan. Vanguard mutual funds and the State Treasurer’s fixed income fund are utilized in the age-based and static portfolio options available through this savings program.
|State Plan Name:||START Savings Program|
|Maximum Contribution:||Equal to five times the qualified higher education expenses at the highest-cost institution in the state. Although Louisiana calculates this amount once per year, the most recent published dollar amount is $303,260 from 2013.|
|Fees:||No fees charged by Louisiana, but the fund you invest in will charge a fee based on its underlying expenses. Usually between 0.045% and 0.40%.|
There are 65,265 registered in Louisiana with a total value of $979,269,859. That is an average of $15,005 per account. Unfortunately 529 plans are not widely used... a 2018 study by Edward Jones found that only 29 percent of Americans were even aware that 529 savings plans exist!