Why You Can’t Rely on Scholarships to Carry Your Child Through School
Sometimes, we put off saving for college because we’re focused on scholarships — either academic or athletic. But according to data from the National Postsecondary Student Aid Study, only 0.2% of students receive $25,000 or more in scholarships per year. The chances of your child receiving a full-ride scholarship are slim.
The time to start saving is now. Children grow up fast, and future students will begin their college educations before you know it. That means it’s crucial to start saving early. When you open a 529 college savings account, you’re not only preparing your student for the financial aspects of college, but you’re also showing them you believe they will attend a post-secondary school.
If your child is one of the few students to receive a full-ride scholarship, what can families do with the money in their 529 accounts? First, you could change the beneficiary to another family member. This could be for a sibling or future generations or yourself if you plan to go back to school. Another option is to keep the funds invested for a few more years if the student decides to attend graduate school.
Finally, you can take the money out for non-education-related costs. The earnings portion (not the amount you contributed) is subject to federal and state income taxes and a 10% federal penalty tax.
Regardless, any money saved is money you don’t have to borrow, and that sets your student up for future success. Take the first step and start learning about how to save for college here.