College is one of the largest expenses many families face. Tuition, fees, housing and books add up quickly, and student loans can follow graduates for years. Saving early, even in small amounts, gives your money more time to grow and reduces the need to borrow later.
Arizona families can save through AZ529, the Arizona Education Savings Plan. Understanding how it works, and how it fits with state aid programs, can help you build a realistic plan for your family.
How the AZ529 plan works
A 529 plan is an investment account for education expenses. Contributions are invested in your choice of portfolios, including age-based options that become more conservative as your child gets closer to college. Earnings grow free of federal and Arizona income tax, and withdrawals are tax-free when used for qualified expenses such as tuition, fees, books and certain housing costs at eligible schools across the country.
Arizona taxpayers may also deduct contributions on their state income tax return, up to an annual limit that is higher for married couples filing jointly. Arizona allows this deduction for contributions to any state's 529 plan, which gives families extra flexibility in choosing where to save.
The earlier you start saving for college, the more time your money has to grow.
State aid and practical tips
The Arizona Promise Program helps eligible Arizona students from lower-income families attend Arizona State University, the University of Arizona or Northern Arizona University by covering tuition and mandatory fees after other grants are applied. Eligibility depends on factors such as residency, high school grades and federal Pell Grant eligibility, so every student should complete the Free Application for Federal Student Aid each year.
Automate a monthly contribution, even a small one, and increase it as your income grows. Invite grandparents and relatives to contribute for birthdays and holidays, and review your portfolio choice each year as college gets closer.
Most importantly, keep your own retirement on track. Students have several ways to pay for school, but there are no loans for retirement, so a balanced plan keeps both goals moving forward.
The advisors at Finance Advice Plus help Arizona families build college savings into a clear financial plan, then help them carry it out. Contact us for a free advice session.