8 Ways To Save For College Tuition — It’s Never Too Early!

Are you a parent who's worried about the rising costs of college tuition? Fortunately, there are ways to reduce the financial burden of college tuition, and it's never too early to start preparing. 

In this blog post, we'll explore 8 effective ways to save for college tuition that you can put into action whether your student is heading to college soon or if it’s a far-off plan.

Ways to Save If College Is Down the Road

If college is still a ways off for your student, there are a number of ways for you to start saving early. Here are some of your options to get a jumpstart on saving for college.

IN CollegeChoice 529 Account

529s are the go-to when it comes to saving for college. 529 accounts let your contributions grow tax-free, and can be used for qualified educational expenses such as college tuition, K-12 tuition, and even repaying student loans up to a lifetime maximum of $10,000. 

There’s no annual contribution limit for a 529 account, so you can fund as much of your student’s education as you’re able to save for.

You can fund a 529 account up to the annual gift limits, which are $17,000 as of 2023. If you contribute more, you will be required to file a Form 709 gift tax return. There’s also a provision for funding 5 years of gifts into a 529 in one year that can get a bit more complex from a reporting standpoint. Be sure to check with your Market Street financial advisor if you have questions.

Here’s some good news for Indiana taxpayers — the Hoosier state has one of the best tax incentives to use a 529 plan among all the states. You’ll get a 20% tax credit on the first $7,500 that you contribute to an Indiana 529 plan.

That means you can save $7,500 for college tuition, and it will only cost you a net $6,000 after you receive the tax credit when you file that year’s tax return.

Hear why 529s are the gold standard for college savings from my colleague Katie Fischer, CFP® in her blog, Parents: Don’t Wait to Start That 529 Plan!

Coverdell Education Savings Account (ESA)

Coverdell Education Savings Accounts (ESAs) are similar to 529 accounts, with a couple minor differences. Just like a 529, your funds will grow tax-free and can be withdrawn tax-free if used for qualified educational expenses.

ESA contributions are limited to $2,000 per beneficiary per year. The account has to be opened before your student turns 18, but they can also be used to pay for elementary and secondary school expenses outside of tuition.

Unlike 529s, there is a phaseout on the ability to make contributions. Your Market Street financial advisor can confirm whether you’re still eligible to contribute to an ESA for the year.

Roth IRA

A Roth IRA is primarily a retirement account, but it can also be used for educational expenses if need be. That’s because your contributions to a Roth IRA can always be withdrawn penalty-free.

529 accounts and ESAs are likely the better option if you know for sure that your student will go to college. But if there’s still a doubt, Roth IRAs offer an additional level of flexibility since the funds can be used for more than educational expenses.

More savings smarts: 2023 Roth IRA contribution limits

Taxable Investment Account

Tax-advantaged savings accounts give your assets time to grow tax-free, but there are often penalties for withdrawing money before a certain age or if they are used for something other than their intended funding purpose (i.e. education). 

Taxable investment accounts, on the other hand, are a flexible option for financial goals outside of retirement, like saving for college.

While they may not offer the same tax benefits as a 529 account, an ESA or a Roth IRA — and you’ll be taxed on gains within the account — taxable investment accounts let you withdraw money for any reason with no penalty. That’s especially helpful if your student decides not to go to college.

Prepaid Tuition Plan

The cost of education is constantly on the rise, but there’s a way to save today if you know that your child will stay in-state. A few states (not including Indiana) offer prepaid tuition plans that allow you to purchase future college credits at today’s prices.

Prepaid tuition plans provide a guarantee against tuition inflation and offer peace of mind. That being said, they are often limited to in-state public institutions, so they may not apply if your student wants to go to a school further away from home.

Ways to Save If College Is Right Around the Corner

If your student is headed off to college in the next year or two, there’s still time to save. These options can bring down the cost of college tuition and put money in your student’s pocket for other educational expenses.

Scholarships and Grants

There are a multitude of scholarships and grants available to reduce the financial burden of college. Many scholarships and grants are based on academic merit, talents, community involvement, and more. Some are local while others are available nationally.

The government’s Federal Student Aid website put together a quick list to help you find scholarships that your student might qualify for. You can find that list right here.

Grants are usually need-based, but your student might qualify for one or more of the following:

Federal Student Aid (FAFSA)

The Free Application for Federal Student Aid (FAFSA) is one of the most well known ways to save on college tuition. Just like the name implies, FAFSA is a free form that any student can submit to apply for financial aid from the federal government.

The FAFSA application determines your student’s eligibility for federal grants, work-study programs, and student loans. Even if you think your income is too high to qualify for need-based aid, it’s always worth completing the FAFSA since some scholarships and grants require it to be completed for entry.

Work-Study Program and Part-Time Work

When push comes to shove, earning an income during college can put money in your student’s pockets for college-related expenses. Aside from getting a part-time job on top of classes, many universities offer work-study programs that can help pay for tuition and school supplies.

Work-study programs can give your student a part-time job in a field that’s related to their area of study.

The job may be on-campus or off, and may allow your student to work for a private nonprofit organization or a public agency. Check with your school’s financial aid office to see if they participate in any work-study programs that are relevant to your student’s studies.

Make Saving For College Part Of Your Financial Plan

One more helpful resource for all things college planning is SavingForCollege.com. Their College Savings 101 page is a great place to dive into the multiple avenues for savings.

If your student is college-bound and you need an extra hand, the team at Market Street can help you work their educational future into your financial plan. Get in touch and get a Market Street financial advisor on your student’s side.


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