Here’s a College Savings Plan with Low-Income Students in Mind

By Jamese Carrell, Member Services Associate

When it comes to college savings, many state 529 programs could be better targeted to help low-income families. The Louisiana START Saving Program is an exception to this trend. For starters, the program is housed at the Louisiana Office of Student Financial Assistance (LOSFA), which makes it uniquely positioned to inform Louisianans across the age spectrum about the many ways to pay for college.

As LOSFA’s overarching goal is to promote and provide college access, including outreach through GEAR UP and TRIO programs, the office focuses on providing first-generation students and low-income families with resources to pursue a postsecondary education. The approach with families and students is to show them a collective strategy that includes teaching them how merit-based and need-based aid, as well as the 529 college savings plan, all factor into being able to fund a college education.

“We’re constantly in contact with parents, students, counselors, and teachers,” LOFSA Executive Director Sujuan Boutte said. “Our job is to provide them with information on how students can maximize their gift aid and minimize their loan debt.”

Elizabeth Morgan, NCAN’s director of external relations, calls the integration of state financial aid and college savings in one agency “somewhat unusual.”

“Often 529 plans are placed under state treasurers, finance, or independent agencies who may not be familiar with the challenges low-income families face in paying for college,” she said. “By integrating 529 plans with need-based aid in particular, states may get more participation from low-income families with young children.”

  • LOSFA implemented the START Saving Program in 1997, and it has several features that are helpful to low-income families.
  • Account owners can save at their own pace with a minimum $10 deposit, through various methods such as payroll deduction, debit account or direct payment.
  • There are no investment management fees charged to account owners; the state bears those costs.
  • Like all 529 plans, the START Saving Program is exempt from federal taxes. In addition, Louisiana is one of only 12 states that offer cash incentives to low- or middle-income families who participate. The START Saving Program offers Louisiana residents a savings match of up to 14 percent of deposits each year, depending on family income.
  • Up to $2,400 in deposits per account, per year, can be deducted from taxable income reported to the state. If the account owner files a joint return, up to $4,800 per account per year can be deducted from taxable income reported to the state.

As states look for ways to increase 529 participation among all residents, these are ideas worth considering.