EDITORIAL: Good news, for some families, about saving for college

June 07--It's that celebratory time of year when college graduates turn their tassels, pack up their dorm rooms, and head home to either plot a way to extend their education or hunt for a job.

Lurking behind these joyous moments and celebration, for many, are piles of student loan debt, which will foist an average monthly payment of $350 upon new alumni, according to one estimate. That doesn't include debt incurred by folks back home to ensure their grad's college bills were paid.

It's too late to do much about those loans now -- except pay them. Exams have been graded, degrees printed.

But it's still within the power of families of students for whom college is some years away to bring tuition closer to earth. Savings plans known as 529s offer one such opportunity -- a point highlighted a week ago, on May 29, when Gov. Charlie Baker visited the region to mark "5/29 Day."

Nearly three dozen states sponsor 529 savings accounts, which allow families to nest away cash for their children's college education without paying taxes on the earnings or the withdrawals, provided they use the money for expenses such as tuition, living expenses and other college-related costs. One needn't attend a public school, and if a child decides not to go to college, someone putting away money can change the beneficiary so the savings help another family member.

The Massachusetts Educational Financing Authority sponsors a 529 savings plan, called the U.Fund, as well as a prepaid tuition program, called U.Plan, in which parents can lock in current tuition rates at Massachusetts colleges and pay down costs in advance.

There are questions savvy consumers should ask about these accounts. For example, they should know which college expenses are eligible to be paid by a 529 plan and which will trigger fees. Consumers should compare 529 plans and research investment costs, though in most cases these fees are modest.

For disciplined consumers, this comes with a big upside. The parents of a 3-year-old who start setting aside $25 per week in a college savings account now will have more than $29,000 banked by the time the child turns 18, according to an estimate by Fidelity Investments, which manages the Massachusetts plans.

That won't pay for an undergraduate degree, especially when the cost of a single year of public college is more than $20,000 for a student living in the same state, according to the College Board. But it makes a difference. While some families reportedly avoid 529 savings accounts because they fear it will affect their eligibility for financial aid, college finance authorities say the effect is actually small.

The popularity of 529 funds has risen -- the funds grew 20 percent in number over the five-year span from 2009 until 2014 -- but many people still say they've never heard of them. And, ironically enough, families of college students with the savings accounts are usually in a better position to pay for college anyway.

The median income of a family with a student in college supported by a 529 savings account is $142,000 per year, according to the College Board. The median income of a family supporting a college student without such an account is about $45,000.

During last week's visit to Methuen, Baker noted he and his wife set up an account for each of their three children and they've "made a really big difference for us."

To be sure, serious discussion is still needed about the exorbitant cost of higher education that is plunging college grads deeper and deeper into debt.

The good news for disciplined consumers, acting ahead, is that it's within their power to do something about it.

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