How High-Income Families Can Save Money on College

Published by Wendy Nelson on

Money in handFamilies with household incomes of $150,000 or more per year still want to save money on college.  Their options for savings are narrower than those of families with lower household incomes, but there are still ways to save.

  1. Need-Based Aid – Do not automatically assume you won’t qualify for any just because your income is higher.  It depends on how expensive the school is and how big the school’s endowment is.  Refer to my article, Minimize Your Out-of-Pocket College Cost – Part 2, for a list of schools with the largest endowments and a stated commitment to meet 100% of an applicant’s need.  Need isn’t completely tied to your income.  It also depends on things like how many kids you have in college at the same time, your assets, and assets held in your child’s name.
  2. Tax Deductions and Credits – These start to phase out for incomes over $130,000 Modified Adjusted Gross Income(MAGI), but do not disappear completely until $180,000 MAGI.  See my article, Federal Tax Breaks for College Parents, for further details.  If your adjusted gross income is over $180,000, you won’t get any federal tax breaks paying for college, but you could still be eligible for some at the state level.  See my next point on 529 plans.
  3. 529 Plans – Many states offer 529 college savings plans with state tax incentives.  In Illinois, for example, you can deduct up to $20,000 in contributions to the Bright Start College Savings plan from your income if you are married filing jointly.  This would lower your state tax bill by $1,000.  To find out what state tax incentives are offered for 529 plans in your state, visit the Saving For College website.
  4. Tax-Free College Savings – Choose a Coverdell Educational Savings Account (ESA) or 529 plan for tax-free investment growth when saving for college.  You can open an ESA as long as your MAGI is $220,000 or less (married filing jointly).  An ESA also limits your contributions to $2,000 per year.  529 plans do not have income limits or low contribution restrictions.
  5. In-State Public Colleges – Your in-state public universities can be the best way to save money on a college education.  Given that the price is state subsidized, it can be the lowest price option for a quality education.  However, I would always recommend comparing net price with private colleges.
  6. Merit Scholarships – Merit scholarships can make the price of a private college comparable with, or even lower than, your in-state public universities.  The higher your student’s GPA and SAT/ACT scores, and the more impressive his or her extra-curriculars are, the greater the potential that private colleges will offer great merit scholarships.  Some public colleges also offer merit scholarships to attract the best students.

College savings for high-income families can be possible if you use these tips and don’t assume you will have to pay sticker price.


James · February 6, 2014 at 3:41 pm

Saving on room and board is the key! Sometimes it’s enough of a bargain just to rent a place rather than pay room and board. My “kids” can usually save 40%-50% over dorm housing costs, and have their own room rather than sharing. That might not be the case in NYC or other expensive cities.
I agree the freshman year should be mandatory on campus but after that, let the kids decide. College housing tends to stay closer to campus anyways or closer to the bars downtown. Town v. Gown is always a problem in smaller towns/cities that have a good size university. Some towns appreciate what the universities bring and others unfairly target student renters with regulations that they don’t apply to “families”. Honestly, I do spend more time “mothering” my student tenants, but I’ll take them any day of the week rather than the “families” who are in the rental market in this area

    Wendy Nelson · February 6, 2014 at 8:19 pm

    Thanks, James! I agree that room and board can be a large chunk of the cost and off-campus living is a great way to save. Some schools, like my oldest daughter’s, require more than just one year on campus. She can’t move off campus until senior year. Looking for schools that allow several years off campus is a key consideration for families looking to maximize savings.

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