Is it ever too late to start saving for college?

Facebook icon Twitter icon Print icon Email icon
Kathryn Flynn

By Kathryn Flynn

November 15, 2018


Ideally, parents should start saving for college as soon as their child is born (or earlier). But, even if your child is in high school there is still time to take advantage of 529 plan benefits and reduce the amount they will have to borrow in student loans.

Set a realistic college savings goal


A good rule of thumb is to aim to save 1/3 of projected future college costs, which may be challenging for parents of high school students. Use a college savings calculator to find the projected cost of college for your child. If you don’t have enough time to save 1/3 of college costs, there are ways to boost your 529 plan savings in the short-term:


  • Ask friends and family to give the gift of college. However, pay attention to the timing of 529 plan gifts. Gifts to the student received after January 1 of the sophomore year of high school will count as cash support on the Free Application for Federal Student Aid (FAFSA). If you are past this deadline, ask for monetary gifts that a parent can contribute to the 529 plan. Cash support to parents is not reported on the FAFSA.
  • Earn reward dollars through Upromise. Parents who join Upromise are eligible to earn cash back for college for online purchases, dining out and using the Upromise Mastercard. There is an 15% cash back bonus on all purchases made with the Upromise Mastercard when an eligible 529 plan is linked to the account.
  • Apply for scholarships that are awarded as 529 plan contributions. Scholarship funds contributed to a 529 plan will grow tax-free until it’s time to pay for college.
  • Save money from part-time and summer jobs. Consider taking a portion of your child’s earnings from babysitting or other jobs and contributing it to their 529 plan. Every dollar your child saves will be one less they will have to borrow with interest to pay for college. 

You may have more time to save than you think

Don’t assume that you have to stop saving once your child begins college. If your child is a freshman in college, you could still save over $10,000 in a 529 plan by making monthly contributions of $200 for the next four years, assuming a 6% annual investment return.


With a shorter investment time horizon, many parents take a conservative approach by keeping their portfolio heavily weighted toward low-risk investments. However, if you want to grow your 529 plan funds faster, you may want to shift toward a more aggressive mix of investments, such as a higher percentage of equities. Age-based 529 plan portfolios, which automatically shift investments as the beneficiary gets closer to college, tend to become more conservative over time. Review your 529 plan’s investment options and make any necessary changes to maximize your returns. The IRS allows two 529 plan investment changes per year.


You could qualify for a state income tax deduction or credit

In addition to federal tax benefits, over 30 states offer an income tax credit or tax deduction for 529 plan contributions. In all but four states, there is no requirement to hold the funds in the 529 plan for a specified amount of time in order to claim the tax benefit. You can make a contribution, immediately withdraw the funds to pay for college and still qualify for the state tax benefit. In effect, the state income tax benefit functions like a discount on tuition. The tax savings can be also invested into your 529 plan to give your college savings an extra boost.


Consider ways to cut college costs

Any college costs that are not covered by savings, scholarships or current income will have to be paid with student loans. To keep loan repayments affordable, students should consider ways to reduce college costs, such as:

·     Earn college credits in high school through dual enrollment programs

·     Choose a less expensive college

·     Keep grades up and apply for academic scholarships

·     Live off-campus at home with parents or with a roommate

At, our goal is to help you make smart decisions about saving and paying for education. Some of the products featured in this article are from our partners, but this doesn’t influence our evaluations. Our opinions are our own.

A good place to start:

See the best 529 plans, personalized for you