We were just dumb kids with a six-pack that a bad fake ID bought, sitting on the living room couch, hoping that we didn't get caught. And when we did, my Dad had some good advice for me. He said "son, there's a time and place for just about everything - it's called college." "College" by Brad Paisley with Pat Green
If you haven't heard the song, "College" offers a great synopsis of the college experience from packing up his car to having empty pizza boxes covering the floor of a dorm room and ultimately meeting the love of his life. The song corresponds pretty closely to my college experience, but he did leave the listener with one question - how do you actually pay for college?
According to CollegeData.com, the average cost for in-state public education for the 2012-2013 school year is $22,261, and the average cost for a private college is $43,289 (see full story here: https://www.collegedata.com/cs/content/content_payarticle_tmpl.jhtml?articleId=10064). This is a serious chunk of change, and it's only for one year! Stretch that to four years and then add the potential for a Masters degree, Law school, or even Medical school and the resulting stress of sending a kid to college can be overwhelming.
Fortunately, there are a variety of tools out there to help the normal taxpayer save for college and provide a small tax benefit at the same time. The most popular option is the 529 plan, which are commonly offered by states individually. The 529 plan in its simplest form allows for a person to make contributions to an account for the benefit of a soon-to-be college student. Once the student starts college, funds can be withdrawn from the account to pay for qualified education expenses with no tax ramifications. Also, most states offer a benefit to a taxpayer that makes contributions to a 529 plan offered in that state. For example, in Arkansas (my state), a taxpayer is allowed a credit on their Arkansas return for contributions to a state-sponsored 529 plan. To find a list of 529 plans in your state, look here: http://www.savingforcollege.com/529_plan_details/
If you already have a child attending college, there are also some income tax benefits to take advantage of for payments made related to the education. Student loan interest is allowed to be taken as an adjustment to arrive at AGI for taxpayers meeting certain income limits. There are also credits available for education, such as the American Opportunity Credit, the Lifetime Learning Credit, and the tuition and fees deduction - see IRS Publication 970 for an overview of these credits and deductions (http://www.irs.gov/pub/irs-pdf/p970.pdf). Keep in mind that there are many rules for these deductions, such as only being able to take one per student and qualifications related to the type of education. If you are supporting children in college, consult with your tax adviser on which credits/deductions you might qualify for.
The underlying theme is this - it's never too early to start saving, and even saving a little is better than none at all. By opening a 529 and saving for your child's education and taking advantage of tax benefits once they are enrolled you can ensure that you can breathe a little easier financially while your child, like Brad Paisley, is having "the best days of my life...in college."