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Getting a start on paying for school

McClatchy-Tribune Information Services

June 27, 2016


PITTSBURGH ó About halfway through high school, Raymond Buehner and Halle Celebrezze came to terms with how expensive a college education would be and the fact that a large share of the financial responsibility would fall on their shoulders. Both began stashing away money from their part-time jobs.

"Iíve been saving a lot since I started this job," said Buehner, 18, who recently graduated from North Hills High School in Pittsburgh. He has been working 20 to 30 hours a week at a family farm called Soergel Orchards outside the city for the past two years. He plans to attend Slippery Rock University this fall and major in finance.

"I have my own savings account I control," he said. "I like to take charge of my own finances. This job has given me good experience. Working the cash register has helped me to be more accountable with money."

While there is nothing new about high school students working and saving for college, researchers at the Washington, D.C.-based College Savings Foundation are seeing a spike in the number of young people going that route.

In its seventh annual report on college savings trends, the College Savings Foundation found more high school students saving their own money for college this year than any previous year tracked. The survey found 60 percent of high school students are saving for college, up from 51 percent in 2015.

The surge comes at a time when previous generations of college students have run up $1.3 trillion in college debt and many of them are finding their choices after graduation limited by all the bills. Those following in their footsteps have taken note.

"High school students have a heightened awareness of the high cost of a college education and its importance," said Mary Morris, chairman of the foundation and CEO of Virginia 529 in Richmond. "Families are talking more about all these things related to financing of college, which has led to more students taking responsibility."

Celebrezze, 18, who graduated this year from North Allegheny Senior High School will be attending the University of Pittsburgh this fall where she plans to major in psychology. She started working part-time between 15 and 20 hours a week at Soergel Orchards three years ago when she was in 10th grade.

Initially, she had no savings goals. That charged about a year after she started the job.

"In my junior year, (the school) started talking really deep into college planning and how expensive it is, and I started putting my money into a savings account my parents started when I was born," Celebrezze said.

"I still have money to spend. I usually take $50 out of each paycheck every week."

According to the CSF survey, 78 percent of high school savers have put away at least $1,000 and 20 percent are saving primarily in 529 college savings plans due to the plansí tax advantages.

The 529 program gets its name from the tax law which created it. These plans are actually college savings trusts set up under Section 529 of the Internal Revenue Code. The concept originated from states, rather than the federal government, with Michigan being the first to establish a state trust for college saving in the late 1980s.

Today, all states offer 529 plans. As long as the money is used for qualified college expenses, a 529 is a tax-free investment. Families can put aside up to $14,000 per child each year in the plans, pay no taxes on the money while it is growing, and pay no taxes when they pull the money out to pay college bills.

The College Savings Plans Network reported at the end of 2015, families had put aside $253.2 billion in 529 plans to cover college costs.

More parents also seem to be using sound strategies to boost savings. Fifty-seven percent of students said their parents save a fixed amount per month, up from 52 percent last year, and nearly half (47 percent) said their parents started saving sometime between the studentís birth and through elementary school.

While the current generation of high school students who plan to attend college are working and saving, many of them also realize they likely will need to tap other funding sources. The survey showed 91 percent will or may get financial aid, and 91 percent of them know that financial aid can include student loans that have to be paid back.

Of the 71 percent of high school students who plan on borrowing, three-quarters of them are worried about paying back loans, and 45 percent expect to be paying back student debt for six to 10 years.

Morris said she believes 529 plans are doing a better job of getting the word out about the opportunities for tax advantaged saving, but often what families have saved for college is not enough to cover all the costs.

According to the College Board, the average cost of tuition and fees at a four-year public college for in-state students is $9,139 a year; for out-of-state students at a public four-year college the average cost is $22,958; and private four-year colleges cost $31,231 a year on average.

"Students have a realization that their savings may not be enough to go the distance," Morris said. "Hopefully they recognize that an appropriate amount of debt could help them achieve their goals.

"For many families itís a combination," she said. "You save as much as you can and make smart choices about where you go and how to put the whole financial puzzle together."