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 Various companies are trying to change that by making it easier for
parents to ask for, and receive, contributions to college savings
plans. As the holidays approach, these providers are stepping up
their efforts to publicize these options and convince families to
try them.
"I think people can feel comfortable going out and saying they
prefer gifts that are more meaningful," said Erin Condon, vice
president of Upromise, a college savings and cash rewards program,
run by Sallie Mae.
"They can say, 'Instead of giving our son a truck, how about helping
us save for college? Or giving him a smaller truck and putting $20
into his college savings plan?'"
Named after Section 529 of the Internal Revenue Code, 529 college
savings plans allow contributors to invest money that can grow
tax-free to pay for qualified higher education costs.
Although typically sponsored by states, the plans are run by
investment companies and account balances can be spent at any
accredited college or vocational school nationwide.
Upromise released a survey last week that found seven out of 10
parents would prefer their children received money for college
rather than physical gifts. Upromise offers a way to let others do
just that: it is called Ugift, a free online service that families
can use to solicit their social networks for college contributions.
Friends and family are emailed bar-coded coupons they can print out
and send in with a paper check. The service is available to
customers of the 29 Upromise-affiliated 529 plans, which include two
of the country's largest: New York's 529 College Savings Program and
Vanguard 529 College Savings Plan in Nevada.
Upromise has found that customers who enlist others to help them
save via the site's rewards program and shopping portal typically
accumulate three times as much as customers who do not, Condon said.
The 529 plans run by Fidelity Investments also offer a free service
that allows parents to set up a personalized contribution page and
share links via email or social media that allow direct
contributions to a child's college savings account via electronic
check.
Fidelity released its own poll recently, which found 9 out of 10
grandparents surveyed said they would be likely - if asked - to
contribute to a college savings fund in lieu of other gifts for a
holiday, birthday or special occasion. Fidelity manages 529 plans
for Arizona, Delaware, Massachusetts and New Hampshire.
These programs tap into the crowd-funding zeitgeist that has seen
people appealing to their social networks to help pay for creative
projects, charitable causes as well as personal costs such as
medical expenses, travel and weddings.
As college costs rise, more people see the need for such help,
according to Joe Hurley, founder of the 529 information site
SavingForCollege.com.
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"It's a reaction to material gifts, and also the rising cost of
college that's creating so much anxiety for parents," Hurley said.
COLLEGE REGISTRY
A few sites facilitate contributions to any 529 plan. GradSave, for
example, lets parents set up a free college savings registry that
accepts contributions from friends and family. The money is held in
an FDIC-insured account until the parents transfer it to their 529
accounts.
Leaf College Savings, meanwhile, offers an education gift card that
anyone can use to make a 529 contribution for someone else. The
giver loads an amount between $25 and $1,000 onto the card and gives
it to the parent, who can then redeem it at the Leaf site and
transfer the funds to his or her 529 plan. If the parents do not
have a plan, the site helps them set one up.
The gift card, however, comes with an "activation fee" of at least
$2.95 plus another $2.95 to get a physical card rather than one sent
by email or Facebook or printed out on your computer.
But givers do not need an intermediary to contribute to a college
savings plan, Hurley said, since virtually every 529 plan accepts
third-party gifts. Those who want to contribute directly to a
child's account typically will need to include the account number
and perhaps the child's Social Security number, but Hurley noted
there is a way to bypass that requirement.
"Just make the check out to the 529 plan, hand it to the parents and
say, 'Here, put it into the plan,'" he said. "That's pretty easy."
One thing that may not be easy is figuring out who gets the tax
break for the gift. Most states offer tax deductions for 529
contributions when the contributor is a parent. Some offer the break
to any contributor. And some do not offer any tax break at all.
The solution? Talk to your tax professional.
(Editing by Lauren Young and G Crosse)
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