A Primer in College Funding & Education Savings

Education remains one of the most important investments families make. With tuition costs rising faster than inflation, planning for college is a cornerstone of comprehensive financial planning. As of 2025, the average annual tuition at a four-year public university exceeds $11,000 (in-state) and $29,000 (out-of-state), while many private universities surpass $45,000 annually. These figures do not include room, board, or ancillary costs.

529 Plans – A Cornerstone Strategy

The 529 savings plan remains one of the more efficient vehicle for education funding:

• Tax Advantages – Earnings grow tax-deferred, and withdrawals for qualified expenses are tax-free.
• State Incentives – Many states offer deductions or credits for contributions.
• Flexibility – Funds can now be used for K–12 tuition, apprenticeships, and up to $10,000 of student loan repayment.

Advisors can help families optimize contributions by aligning them with annual gift tax exclusions. In 2025, individuals can contribute up to $18,000 per beneficiary ($36,000 for married couples) without incurring gift tax, with the option to “superfund” five years’ worth at once.

Reviewing Financial Aid and Other Tools
Not all families can or should fully fund college via 529s. Financial aid remains critical. Advisors should guide clients through FAFSA changes, expected family contribution formulas, and strategies to avoid inflating reportable assets.

Other strategies include:

• Coverdell ESAs – Smaller contribution limits but broader qualified uses.
• UGMA/UTMA Custodial Accounts – Provide flexibility but lack the tax benefits of 529s.
• Scholarships and Grants – Advisors can help families explore overlooked funding sources.

Balancing College Funding with Retirement

Perhaps the most important discussion is balancing college savings with retirement readiness. Advisors should stress: “You can borrow for college, but you cannot borrow for retirement.”

Families must avoid sacrificing long-term security for short-term educational goals.

Today’s Environment

With inflation impacting tuition, volatile markets affecting account values, and legislative changes ongoing, families need to regularly review their education savings plan. Annual reviews can align contributions, update assumptions, and rebalance investments within the 529.

A disciplined, advisor-guided approach ensures families stay on track for one of life’s largest financial milestones.

To learn more, schedule a meeting with one of our financial professionals today.

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