McRae: Tips for saving for college

By State Treasurer David McRae

September is College Savings Month. While I have written previously about Mississippi’s two college savings plans (MACS, which lets families start a savings account for as little as $25, and MPACT, which allows families to pre-pay for college tuition to lock in today’s rates), I wanted to dig further into why these programs deliver so many benefits to Mississippians.

With college tuition costs increasing faster than inflation, it’s important to start saving now. According to the College Board, the average cost of tuition and fees for a full-time undergraduate at an in-state, four-year, public university is $10,740 for 2021-22, up from $5,720 in 2001-02. Private, four-year colleges cost even more — an average of $38,070 for tuition and fees, up from $26,380 two decades ago.

While it’s never too late to start preparing to pay for college for yourself or loved ones, the earlier one starts, the more time there is to grow your savings through contributions and interest earned over time. Why? The answer is simple: Compound interest.

Albert Einstein once described compound interest as the “eighth wonder of the world,” saying, “he who understands it, earns it; he who doesn’t, pays for it.” Compound interest is when you add the earned interest back into your principal balance, which then earns you even more interest, increasing your returns. In other words, with compound interest, you’re not just earning money on your initial contributions. Even your interest earns interest!

So, how do you start taking advantage of this compound interest opportunity? First, sign up for a MACS plan. Then, make your contributions to the account automatically every month. And if you want to see that growth really add up, recruit your friends and family to contribute as well!

Beyond using the power of compound interest, there are other ways to make attending college more affordable. Here are a few tips.

First, where possible, students should take advantage of opportunities to enroll in Advanced Placement (AP) courses for college credit. You may also consider attending one of Mississippi’s terrific community colleges before moving on to a four-year university. Others might consider summer classes at nearby community colleges after high school graduation, transferring the hours to knock out a few required courses at a more affordable rate.

Scholarships are another great way to reduce college costs. Some are need-based while others are merit-based. There are great resources online to help with scholarship searches, and most schools have lists of available scholarships to explore during the application process.

All students should also fill out the Free Application for Federal Student Aid (FAFSA) to find out what types of federal financial aid might be available based on each student’s needs criteria.

Finally, many universities now offer programs to earn some four-year degrees in three years by taking extra hours each semester and during summer sessions. For students planning to go to graduate school, many colleges offer combined degree courses to earn undergraduate and graduate degrees, such as an MBA or law degree, over a compacted time schedule. These accelerated programs are also a great option to shave time and expenses from the total cost of college.

Our team at your state Treasury would love to answer any questions and help you get signed up for a college savings plan. Please call us at (601) 359-5255 or visit Treasury.MS.gov.

Mississippi State Treasurer David McRae is the 55th Treasurer for the State of Mississippi. In this role, he helps manage the state’s cash flow, oversees College Savings Mississippi, and has returned more than $50 million in unclaimed money to Mississippians. For more information, visit Treasury.MS.gov.

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