Idaho tweaks college savings plan

The state-run IDeal program is gaining popularity.

STATELINE.ORGApril 5, 2014 

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One way parents and grandparents can help pay for the ever-rising tuition and fees at Boise State University and other colleges is to set aside money in a state-administered savings account, where earnings grow tax-free.

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  • Idaho’s growing 529

    Investors had put $295 million into the Idaho college savings program as of February, a 34 percent increase from January 2012.

    Number of accounts: 24,019

    Number of accounts owners: 12,643

    Average per account: nearly $1,900

    Total given to accounts as gifts: $1.7 million

    Average gift amount: $1,081

    Age of account owners: 20 percent are ages 30 to 39; 36 percent are 40 to 49; 25 percent are 50 to 59; 17 percent are 60 or older.

    Source: State treasurer

More parents and grandparents are turning to state 529 savings plans to sock away money for a child's future college costs. That's true in Idaho, where the assets held in the state college savings plan - called IDeal - have grown by 34 percent since January 2012.

More than $295 million is held in the savings plans, according to the Idaho treasurer's office, which runs IDeal.

"Idahoans are starting to catch on that we have a great vehicle here to use for saving for college education," Treasurer Ron Crane said.

IDeal benefits future students, including adults who plan to return to school and want to save for it. The plan was created in 2001 and doesn't require help from a financial planner, which isn't the case in some other states' plans.

The plans can be used for any undergraduate, graduate, vocational, technology, career-training or community-college studies.

Many states recently have made changes to their programs, and with the tax filing deadline fast approaching, savers who don't pay attention might miss out on the full benefits of such accounts.

Idaho is lowering its annual program fees from 0.75 percent of the amount of the current investment to 0.69 percent for most portfolios.

Money contributed to a 529 (named for the section of the federal tax code that authorizes them) is not deductible from federal income taxes, but the investment grows tax-deferred. There are two types of 529s:

• 529 savings plans, which are similar to a 401(k) plan or individual retirement account (IRA), in that a saver invests in mutual funds or similar investments.

• Prepaid plans, which allow savers to pay all or part of the costs of an in-state public college education, to avoid future price increases. In many cases, the money in a prepaid plan also may be used at private and out-of-state colleges.

The plans are operated by states or educational institutions. They are available in all states but Wyoming, and 30 states, including Idaho, and the District of Columbia allow savers to take state income-tax deductions for 529 contributions.

Idaho offers a special state income-tax deduction of up to $4,000 per person, or $8,000 for married joint filers. That applies to any Idaho resident who contributes money to a 529 account, not just a parent.

With college costs skyrocketing, many states are trying to persuade more people to make use of 529 plans.

Maine offers an unusual perk: It announced that it would partner with the Portland-based Alfond Scholarship Foundation to open up 529s, with initial investments of $500 in each account, for each baby born in the state.

That's not much help toward today's college costs, but Colleen Quint, president and CEO of the foundation, said the goal is to get families thinking about saving for college.

"The $500 is seed money," Quint said.

Statesman business reporter Audrey Dutton contributed.

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