SAVE MORE AND BORROW LESS
Starting early and saving often can have a positive impact on the real cost of college. Saving even a modest amount each month in a 529 plan can be an effective strategy to reduce or eliminate your reliance on student loans, which can substantially add to your out-of-pocket costs. Plus, every dollar saved may amount to more than a dollar earned because a 529 plan has the opportunity to benefit from possible compounded earnings that may also grow tax free over time.
You can create an account with just $25 if you set up a monthly automatic contribution plan, which transfers a set amount per month to your account.1 Otherwise, the minimum to open an account is $250, or $1,000 should you and your financial advisor opt for Portfolio Allocator. The more you save, the more likely you are to avoid unnecessary debt.2
All four scenarios show the out-of-pocket cost based on an estimated $100,000 4-year college education at a public university. These scenarios also assume the receipt of approximately $25,000 in financial aid, which will vary depending upon how much is accumulated in a tax-advantaged account. The loan portion of each column is calculated to include a fixed interest rate of 6.25% repaid over 180 months as defined by Sallie Mae (that’s like paying off a 15-year mortgage) following graduation with 54 monthly payments of $25 made during college. All savings in the tax-advantaged account depicted in this chart assume 5% monthly compounded growth from the beneficiary’s birth until age 18. Source: OppenheimerFunds 2013. The hypothetical examples are for illustrative purposes only and do not predict or depict the performance of any specific investment. Actual results may vary.
1 Systematic investment plans do not assure a profit nor guarantee against loss in declining markets. Before investing, investors should evaluate their long-term financial ability to participate in such a plan.
2 A maximum of $400,000 can be contributed per beneficiary. All assets, including earnings, under all 529 plan accounts established in any New Mexico-sponsored 529 plan for the benefit of a particular beneficiary must be aggregated when applying this limit. New contributions will not be allowed once this limit is reached. Earnings, however, will continue to accrue.