Secure Your Future
DOE will help with your college savings needs
Jan 19, 2006 3:57 PM
As educators, you probably appreciate the value of a college education more than most. So it’s likely that one of your most important long-term savings goals is to have enough financial resources to help pay for the college expenses of your children, grandchildren or other loved ones.
Not that you are responsible for paying all of the expenses involved. The students’own resources, scholarships, work and loans are all sources of money for college expenses. However, over the years one of the most common reasons for UFTers to delay their retirement has been the desire to finish paying for the educational expenses of their children.
And these expenses are staggering. Tuition alone in 2004 averaged $19,710 a year at private schools and $4,694 at public schools. It is even higher at top-tier private schools and in New York State tuition costs are growing faster than inflation. There are also many other costs: room and board, books and supplies, phones, social life, travel on holidays, etc. Some experts predict that costs for four years at a private college could exceed $240,000 by 2019 and $95,000 at a public college. And have you heard how many students are now taking five years to graduate?
How are you going to pay for this? There are many different ways and you should check with your financial advisor for assistance. If you have no advisor you may wish to check with NYSUT (the UFT’s statewide affiliate) Member Benefits at
1-800-626-8101 for information on its Financial Counseling Program. For many members, after retirement savings, educational savings are probably the greatest financial concern.
One of the plans you may have heard about or will hear about is the 529 College Savings Program, named after the section of the Internal Revenue Code that permits it. Earnings on money contributed to a 529 plan are tax-deferred and until at least Dec. 31, 2010 (it could be extended), qualified withdrawals are exempt from federal income taxes. A qualified withdrawal is one used to cover such expenses as tuition, fees, room and board, books and supplies. Withdrawals for other purposes may be taxed and may result in an IRS penalty.
In addition to the benefits of the federal income tax law, New York’s 529 College Savings Program allows New York State taxpayers to deduct up to $5,000 per year ($10,000 for married couples filing jointly) on their New York State income tax return. Residents of other states can contribute to this plan but should check with their own state to see if it offers tax or other benefits not available through New York’s program. Qualified withdrawals are also exempt from New York State income taxes. The New York State plan offers a variety of investment options managed by the Vanguard mutual fund company.
For detailed information on New York’s 529 College Savings Program, you can call 1-800-420-2671 or check the Web site, www.nysaves4college.com. New York State’s plan has been recommended by Money Magazine as one of the finest in the nation.
Now the great news for those who, after careful study, wish to participate: The Department of Education has developed a way to allow you to have your contributions for the 529 program deducted from your paycheck and forwarded automatically.
Payroll Administrative Memorandum No. 20, 2004-2005, describing how to enroll in the DOE’s salary deduction program, was sent to the schools on April 7. Ask your school secretary about it.
The 529 program has been available since 1998 and is available to all employees. At last report, fewer than 100 people were enrolled. It appears that a great many people who would benefit from participating are not doing so. If this program fits your needs, act now.
