529 plans help lessen burden of paying for college

DOVER — When you start to picture what the future looks like, people want what is best for their children, friends and loved ones, said Delaware State Treasurer Colleen Davis.

“In a small way we’re trying to help people do that,” she noted Friday, National 529 College Savings Plan Day.

As higher education costs continue to increase, a 529 savings plan is designed to help pay for education expenses and reduce the possibility of debt. Delaware’s 529 plan is sponsored by the state, and managed by Fidelity Investments.

Taxes don’t have to be paid on the money as it grows, and withdrawals for educational expenses — tuition, books, etc. — are federal and Delaware income tax-free.

“When kids are getting into college and they’re feeling pressure to cover some of their own expenses, that can sometimes distract from their performance, and we do see kids do better — just as far as their success rate at school at actually finishing and getting their degree — they tend to be a little bit more free to do that when some of those expenses are paid for,” Ms. Davis said.

While the best time to start saving up for a child’s education is when you have a “brand new little one,” Ms. Davis noted that there’s a lot going on when there’s a new baby, and thinking that far ahead can be difficult.

“Any stage is a good time. Probably one of the best times is when kids are making some of those milestones — their first time going to school full time, whether that’s kindergarten or preschool,” she said.

Saving even under normal circumstances can be challenging, however. Coupled with the current circumstances going on nationwide, Ms. Davis said that thinking ahead is important for offsetting debt later, “for times like these that none of us could have predicted,” she said.

“Some of those expensive student loan repayments can be extremely daunting and as a result individuals from my own generation and one right behind me, many of us are sort of putting off some of those milestones as we pay off that college debt,” she said. “So I think that when we can start saving early on those dollars really do grow.”

There’s no investment minimum for a Delaware 529 account. The investment decisions can be left to Fidelity, or more customized.

“I have two children myself, and when they’re little, $25 is relatively easy to set aside for them and then when you sort of start asking family and friends to contribute to that same education savings account, it really does grow,” she continued.

Kara Bradl is part of the cohort who will graduate high school with the last months of their senior year upended: graduations are still coming together, and other hallmarks of the close of high school disappeared in mid-March. She’ll start her freshman year at Cabrini University as many institutions try to figure out how to operate amid the virus. Kara will be studying early education, Pre-K to grade four.

“That was my career area, and at my high school, which I’m in early childhood education, which kind of helped me start to know where I want to go and what I want to pursue,” she said. “I kind of thought that early childhood would mean a lot to me because I like little kids and I always like to work with them.”

She was drawn to Cabrini, in Pennsylvania, due to the small community and its relatively close location.

As Kara was growing up, her mother, Deborah Bradl, said she and her husband were saving up as they could. She noted that her husband didn’t attend college, and it was important for him that Kara pursue higher education.

Mrs. Bradl recalled what it had been like financing her own education.

“I looked back at what my parents had done for me and just what they went through as far as applying for loans and scholarships, and we were really trying to lessen that for ourselves for both Kara and her younger sister,” she said. “Even if we would have started a little bit better like in middle school like the time just goes so quickly, and then before you know it you need money for your down payments.”

At first, they didn’t know about the 529 plan but as Kara — now a senior at Polytech High School — got closer to high school, they realized college was quickly approaching.

In a previous role, Mrs. Bradl was working with students and helping them exit high school, she became more aware of the plan.

“We started looking at the 529 to at least put the money into that, so that it would grow because it wasn’t growing really that much in a regular savings account,” she said.

While they will have to take out some loans, it won’t be as much as they had originally though, said Mrs. Bradl.

“The lucky part for us is that we also have grandparents who were saving pretty big chunks of money that are now in her 529, and are able to continue growing,” she said.

Kara noted that it is helpful that her parents started saving, to offset the threat of loans after she graduates.

“I think the biggest thing coming from a parent, is that even if you’re just thinking about it now, no matter how old your child is, just any little bit of money that you can put aside, it’ll help and it’ll add up over time you’d be amazed at how quickly you’ll have money to offset the future,” Mrs. Bradl added.