To give your family the most flexibility, starting early is key. With college costs continuing to rise, it's becoming more and more difficult to pay for higher education without turning to student loans—nowadays often six figures' worth. No matter where you're starting from, our financial advisors will put together a savings plan to help make sure you have what you need.
Parents, grandparents, other family members, even friends can contribute money for college (elementary or high school, too). Any earnings will grow federal income tax-deferred, and many states offer tax deductions.
Help cover the costs of college, even kindergarten through 12th grade. Like 529 plans, Coverdell accounts grow tax-deferred, however, there's a $2,000 yearly contribution limit and those with higher incomes might not be eligible.
Known as UGMA/UTMAs, these custodial accounts let parents (and others) gift money to children. Earnings are taxed at the child's tax rate, and unlike a 529 or Coverdell account, you can use the money for college or anything else.
It's not a college savings fund, but a policy purchased for your child when they're still a baby will accumulate cash value over time (and grow tax-deferred) that you could use to help pay for education expenses.
Questions about college savings plan? We've got answers.
529 plans are by far the most popular way to save for college. These state-sponsored accounts grow on a tax-free basis and allow for tax-free withdraws if used for qualified education expenses. Check out other savings options that might be right for you.
Costs will depend on the type of school you're aiming for—private or public. First up, decide how much of your child's education you want to cover. Do you want to pay a percentage? A specific dollar amount? Or maybe all of it? Once you've got that settled, you'll need to figure out which type of savings account (or accounts) will best fit into your overall financial plan. Need help? Our financial advisors are here for you. Get matched with one today.
Contributions to college saving plans like a 529 and Coverdell account will grow tax-free, and are usually exempt from federal income taxes. Plus, many states offer tax deductions for 529 plans.
Anyone can open a 529 account in their home state, or in any other state. Once you've established an account, you'll choose the type of investment (usually mutual funds) you want to invest in. The money contributed will grow on a tax-deferred basis until it is withdrawn. As long as the money is used for qualified education expenses, it will be tax free. Connect with an advisor to see if a 529 plan is right for your education funding goals.
Anyone who lives in the United States and is aged 18 and over can open a 529 or Coverdell account. And anyone can contribute money to help pay for a child's education—parents, grandparents, aunts, uncles, cousins, even friends. Find out more on how to set up your 529 plan.
No. You can use a 529 plan from any state to pay for qualified expenses in any other state. So, you can use funds from a 529 plan in Oregon to pay for college in New York. From a tax perspective, there could be tax deductions or credits that you can take advantage of based on contributions to a particular state's 529 plan. Ask a financial advisor which 529 plan is best for you, get matched with one today.
The good thing is there are no deadlines to use the money you've accumulated, so you have time to weigh your options. Here's what you consider:
Change the beneficiary to another family member including yourself.
Use the remaining money to repay up to $10K of student loans.
Cash it out (a non-qualified withdrawal could trigger penalties and taxes).
How can Northwestern Mutual help with a college fund?
When you work with us, we see a college savings plan as one part of an overarching financial plan. We'll look at everything you have going on—your goals like saving for college, your needs, and your priorities. With your big picture in focus, we'll create a tailored plan to help you save, grow your money, and make sure everything's protected.