How to overcome 3 common obstacles when saving for college

One of the biggest obstacles to saving for college is getting started. But once you open a 529 plan, you can handle just about any obstacle—like rising tuition, unpredictable markets, or a tight budget—that gets in your way. The key is to focus on what you can control.

The number One Obstacle 1: Rising tuition


In the last 10 years, the total cost of attending college increased by about 25.3% at private schools and 29.8% at public colleges.* For the 2019–2020 school year, the average annual tuition for private college and public college was $36,880 and $10,440, respectively.** But don’t let these statistics scare you into inaction. Just focus on what you can control: your goal and your saving habits.


Your goal
It’s important to remember that most parents don’t pay for all of their child’s tuition, fees, and room and board. For the 2019–2020 school year, parents covered about 44% of these costs with income and savings.*** The rest was covered by a combination of scholarships and grants, student income and savings, and loans.

Rather than trying to save enough to cover four years at a public college, save what you can. Even $500 can help your child pay for books, technology, or fees.

Your saving habits
You’ve probably heard it before: Save as much as you can for college. But it may be even more important to focus on how you save. When you regularly contribute to a 529 plan—weekly, monthly, quarterly, or annually—you reinforce the habit. And every dollar you invest has as much time as possible to generate its own investment returns thanks to compounding.

Here’s a hypothetical example showing the difference consistency plus timing can make:

A hypothetical graph of market volatility from 2019 to 2025, showing a savings of $24,917 by 2025

This hypothetical example does not represent the return on any particular investment and the rate is not guaranteed.


Lena’s parents open a 529 with $1,000 and contribute $1,200 each year for 5 years. Mason’s parents also open a 529 with $1,000. They make no contributions for 3 years, but then invest $1,000 in year 4 and $5,000 in year 5.

Both sets of parents invested a total of $7,000 in an account earning 6% annually. All factors were the same except their saving habits. Lena’s parents split their additional investment of $6,000 into equal, regular contributions while Mason’s parents made sporadic contributions that had less opportunity to compound.

Lena’s account earned almost $1,509 over the 5-year period for an end balance of almost $8,509. Mason’s account earned just $761—$191 during the first 3 years, $131 the fourth year, and $439 the fifth year—for an end balance of $7,761.****

The number Two Obstacle 2: Unpredictable market returns


2020 was an unpredictable year for a few big reasons, and stock market performance was one of them. The month of March, in particular, took investors for a wild ride: On March 9, 12, and 16, the Standard & Poor’s 500 Index lost 7.6%, 9.5%, and 12.0%, respectively. On March 13 and 24, it gained 9.3% and 9.4%, respectively.†

Market volatility can be unsettling, but it’s a normal part of investing that’s completely out of your control. To prepare for market ups and downs, play offense, not defense. Here’s how:


Invest in a strategically diversified portfolio
With a NY 529 account, you can choose an age-based option that automatically shifts your investments to more conservative portfolios as your timeline for making withdrawals gets closer. When you invest in an age-based option, your time horizon—not market movement—drives changes to your asset mix.

If you’d like more involvement, you can choose an individual portfolio that lets you design and manage your investment strategy. Set and rebalance your asset mix to fit your goals, risk tolerance, and time horizon to factor in market volatility up front.


Think long-term
Short-term swings can distract you from seeing the bigger picture. Although March 2020 was an especially volatile month, the S&P 500 finished the year with a 16.26% gain and closed at a record high.†† Stay focused on the long-term and stick with your financial plan for your best chance of reaching your goal.

The number Three Obstacle 3: Saving on a tight budget


If you’re like most families saving for college, your household expenses compete with your savings goals. Here are a few tips to maximize college savings without blowing your budget:

  • The NY 529 Plan offers an automatic investment plan so money is transferred directly from your bank account to your 529 plan on a set schedule. This makes it easy to save regularly, and it earmarks money for college savings before it can be spent on other priorities. You can start small and reevaluate the amount you invest every few months.
  • Ask family and friends to consider contributing to your child’s Direct Plan account on special occasions. You can create a Ugift code that makes it easy for others to deposit money directly into your account. You can also use a portion of the money gifted to your child to make a 529 contribution.
  • If you live in a state like New York that offers a tax deduction for 529 contributions, you may be able to offset some or all of your state income tax liability with 529 contributions, which is a win for you and your child. But don’t wait until tax time—you need to invest in your 529 account by the end of each calendar year to take advantage of the benefit.

Once you overcome the initial obstacle of opening a NY 529 plan, you’re primed to handle any hurdles that get in your way. Saving for college amid rising costs, unpredictable markets, and a tight budget are no match for an investor who takes advantage of the factors they can control.

*Abigail Johnson Hess, The Cost of College Increased by More Than 25% in the Last 10 Years—Here’s Why, CNBC, December 13, 2019. Costs include room and board.
**College Board, Trends in College Pricing 2019.
***Sallie Mae, How America Pays for College 2020. Survey conducted by Ipsos.
**** These calculations do not reflect management, administrative, and other fees associated with 529 Plans. These results serve as hypothetical illustrations and do not reflect actual rate of growth. Investment returns are not guaranteed, and you could lose money by investing in a 529 plan.
†Julie Jason, The Coronavirus Stock Market: A Market Gone Wild, Forbes, April 8, 2020.
††Jesse Pound, Here Are the Top Performing Stocks in the S&P 500 for 2020, CNBC, December 31, 2020.

Booklet and Tuition Savings Agreement. State tax benefits for non-resident New York taxpayers may vary. Please consult your tax advisor about your particular situation.

For more information about New York's 529 College Savings Program Direct Plan, download a Disclosure Booklet and Tuition Savings Agreement or request one by calling 877-NYSAVES (877-697-2837). This document includes investment objectives, risks, charges, expenses, and other information. You should read and consider them carefully before investing.

Before you invest, consider whether your or the beneficiary's home state offers any state tax or other benefits that are only available for investments in that state's 529 plan. Other state benefits may include financial aid, scholarship funds, and protection from creditors.

The Comptroller of the State of New York and the New York State Higher Education Services Corporation are the Program Administrators and are responsible for implementing and administering the Direct Plan.

Ascensus Broker Dealer Services, LLC, serves as Program Manager and, in connection with its affiliates, provides recordkeeping and administrative support services and is responsible for day-to-day operations of the Direct Plan. The Vanguard Group, Inc., serves as the Investment Manager. Vanguard Marketing Corporation provides marketing and distribution services to the Direct Plan.

No guarantee: None of the State of New York, its agencies, the Federal Deposit Insurance Corporation (FDIC), The Vanguard Group, Inc., Ascensus Broker Dealer Services, LLC, nor any of their applicable affiliates insures accounts or guarantees the principal deposited therein or any investment returns on any account or investment portfolio.

New York's 529 College Savings Program currently includes two separate 529 plans. The Direct Plan is sold directly by the Program. You may also participate in the Advisor-Guided Plan, which is sold exclusively through financial advisors and has different investment options and higher fees and expenses as well as financial advisor compensation.

Contributions of up to $10,000 are deductible annually from New York State taxable income for married couples filing jointly; single taxpayers can deduct up to $5,000 annually. New York State tax deductions may be subject to recapture in certain circumstances such as rollovers to another state's 529 plan, nonqualified withdrawals, or withdrawals used to pay elementary or secondary school tuition, registered apprenticeship program expenses, or qualified education loan repayments as described in the Disclosure Booklet and Tuition Savings Agreement. State tax benefits for non-resident New York taxpayers may vary. Please consult your tax advisor about your particular situation.

All investing is subject to risk, including the possible loss of the money you invest.

Past performance is no guarantee of future returns.

Diversification does not ensure a profit or protect against a loss.

We recommend that you consult a tax or financial advisor about your individual situation.