Small contributions each pay period can make big impact later

By AMEERAH CETAWAYO, The Daily News, acetawayo@bgdailynews.com

As Charley Pride begins his sixth year as director of student activities at Western Kentucky University in July, he’ll also continue the college savings trust he has set up for his two children.

Pride sees it as something to fall back on as the cost of higher education rises.

Many people don’t start thinking about how to pay for college until high school, as they’re inundated with test scores, essays and other requirements, Pride said.

&#8220For me, since I work on a college campus, it sort of helps out,” he said. &#8220Hopefully, when we get to that time, it won’t be that big of a burden – we’ll have something there.”

Pride’s savings trust is one of more than 10,000 active accounts – combining to a total of more than $100 million in assets – in the state’s Kentucky Education Savings Plan Trust, according to Craig Parkin, relationship manager of Tuition Financing Inc., which oversees nine college savings plans nationwide, including one in Kentucky.

KESPT is a state-sponsored, tax-advantaged 529 college savings plan administered by Kentucky Higher Education Assistance Authority and managed by TIAA-CREF Tuition Financing Inc.

A KESPT account can be used for tuition, fees, supplies, books, equipment required for enrollment, and certain room and board expenses – depending on a student’s housing and enrollment status – in Kentucky and nationwide.

But Parkin said it’s important to distinguish the KESPT from the other savings trust also administered by KHEAA: Kentucky’s Affordable Prepaid Tuition Plan.

&#8220The KAPT program – which at this time is not open to new enrollment – is a prepaid program that allows account owners to purchase future tuition at Kentucky schools at today’s prices through a contract with the state. The funds are able to be used at schools outside of Kentucky, (but) if there is a difference in tuition with the out-of-state school, the account owner will have to make up the difference or be able to use the excess for qualified expenses,” Parkin said.

KESPT is a savings plan that allows contributions to an account that is invested in any combination of three options, according to Parkin. Those options include the 100 percent equity option, the managed allocation option and the guaranteed option.

&#8220The most popular of which is the managed allocation option that automatically adjusts the investment mix as the child gets closer to college age,” Parkin said.

&#8220With a KESPT, the account grows tax-deferred and the account owner will never pay taxes on the earnings when they are used for qualified tuition expenses at any accredited public or private college, university or grad school across the country. The account owner remains in control of the assets until they need them to pay for college.”

Parents can start a KESPT for as little as $15 per pay period by having funds automatically deducted from their payroll check, or for as little as $25 by check, electronic funds transfer, automatic contribution plan or rollover from another qualified tuition savings program.

Pride sees the direct deposit as a benefit of using the program.

&#8220I can always put more in, but I don’t have to worry about not putting enough in,” Pride said.

Pride said the savings trust is a good opportunity to put something back and be prepared when the time comes.

Since he’s putting in little chunks of money each time and taking a rate of return on top of that, it’s easier to save.

&#8220If you try to do it all at once, it’s a daunting task,” Pride said.

Essay contest

To gain more awareness about 529 savings trusts, KHEAA and TIAA-CREF have partnered with Wal-Mart for an essay-writing contest, &#8220Why is College Important to You?”

The contest is open to Kentucky students in grades 3-5. Wal-Mart will contribute $250 on behalf of one student in each grade into a 529 college savings plan account.

Students are asked to explain in 100-250 words why going to college is important, and the essays will be judged on content, organization and quality, creativity, and spelling, grammar and punctuation.

One essay will be chosen from each grade, and prize-winning students will be recognized during National College Savings Month in September. In addition, one of the winning essays will appear in the September issue of Kentucky Living magazine.

All entries must be postmarked by July 6 or e-mailed by July 10.

– For more contest information, visit your local library or call (866) 583-8226. Official rules and registration form may be found online at www.kysaves.com/save4college.