Last fall, the Tennessee Treasury Department launched a special initiative to help families of low to middle income levels with college savings with a TNStars College Savings 529 Account. The Tennessee Investments Preparing Scholars (TIPS) program provides a 4-to-1 contribution match for eligible families on a minimum deposit of just $25, up to a maximum of a $500 match per student each year. To apply, families must have a TNStars™ account, or can open a new account. Time is running out for the initial qualifying period that ends on June 30, 2015, and there is still space available to apply.
To qualify for the TIPS matching grant program, the family’s household Adjusted Gross Income must be less than 250% of the Federal poverty level. For 2014 federal adjusted gross income, a family of 4 making $59,625 or less would qualify. This means that if the family enrolls in the TIPS program and puts just $25 in the TNStars College Savings 529 Account, the Tennessee Treasury Department will put $100 in an account for the designated child. If the family saves a total of $125 in the account by the June 30th qualifying period, Treasury will contribute $500. Families may apply for the TIPS program for up to three years, meaning they could receive up to a $1,500 lifetime benefit per child.
The TIPS program was designed to help encourage families of all means to start saving early for higher education expenses. Opening a TNStars College Savings 529 Account allows families to continue saving with huge advantages. Research shows that children with a dedicated savings account are seven times more likely to complete a four-year college degree. And the power of compounding interest in a TNStars™ account means that it is possible to make a large impact toward your child’s post-secondary education when you start saving early. College Savings 529 Accounts allow you to withdraw funds tax-free for qualified higher education expenses, and the accounts also have tax advantages for gifting and estate-tax purposes.
“We want to show all Tennessee families how to make compounding interest work for them and help grow those dollars they set aside to help their child’s future,” Tennessee Treasurer David H. Lillard, Jr. said. “Money in a college savings account not only helps with tuition, it can also be used for many other costs associated with higher education such as books, fees and other material.”
Early saving in a 529 account, even small amounts, allows the power of compounding interest to grow your money. This is a great way to counteract the interest that works against you if you end up taking out a loan for these expenses.
Let’s say you manage to save $25 a month for your child’s college education. That $25 a month saved every month becomes $300 a year. If you start saving when your child is 1 year old and assume a modest 6% compounding interest rate, when your child is of college age you would have contributed approximately $5,100, but thanks to the power of compounding interest your TNStars™ account would have $8,972! And if you qualified under the TIPS program for three years and received the lifetime $1,500 matching grant, that number would be a combined total of $10,472.
Those who qualify for the TIPS program and open a new TNStars College Savings 529 Account may also qualify for additional incentives of up to $375. For more information or to apply for the TIPS program, visit tnstars.com/tips.
