If you’ve been saving money in a 529 plan for your child over the years, now’s the time switch into spending mode.
Joe Hurley, founder of Savingforcollege.com, suggests starting to pay as many bills as you can out of that account and continuing to fund it while your child is in school. In most states, you’ll get a tax break on the money you contribute, even if it’s in the plan only briefly before you spend it.
If your relatives want to chip in too, ask them to hold off until the spring of your child’s sophomore year. That way, the college won’t reduce any need-based grants because of the extra family resources. And to reduce your risk in a stock market meltdown, make sure your 529 is invested in a target-date fund based on your child’s age or move the money into bond and stable-value funds.
When tuition bills come due, bear in mind that you probably don’t have to spring for the whole semester at once. Nearly every college offers parents some sort of interest-free payment plan, sometimes with a modest set-up fee of $50 or so, notes Paula Bishop, a Bellevue, Wash., CPA who specializes in college planning.
Typically those plans let you pay in six to 10 installments throughout the school year. Some schools, such as the University of Colorado, require that the payments be made via automatic debit from a checking or savings account.
A handful of colleges, such as the University of Southern California, let you pay with a credit card without an additional service fee, which means you can rack up some frequent-flier miles or get a little cash back to put into your college fund.