How the new tax law affects planning for college

INDIANAPOLIS (WISH) — As thousands of Hoosier parents prepare their children for college, they see it as an investment in their child’s future.

But if you’re not careful it could put you in debt for decades.

Every child has a dream. It’s an unfiltered optimism that consumes him or her to believe in endless opportunity. But what could topple that dream is a tower of student loan debt.

Nearly 60 percent of students leave college in Indiana with debt. On average that debt is nearly $30,000.

Many families start preparing for this financial battle in middle school or high school. College planners say you should be preparing from birth.

“Just as we don’t want you to plan for your retirement at 62 years old,” said Bill Wozniak, from the non-profit INvestEd, which helps thousands of students prepare financially for college in Indiana.

The Trump administration projects most Americans will get a tax break from the new law. What’s one question Hoosier families must ask themselves now?

“Is college present or college future something that you’re considering with that tax refund?” said Wozniak.

He said one option is investing in a 529 plan. You can save money, tax-free, for your education. It used to be just for college. Under the new tax law, the 529 plan can now fund private elementary and high school costs.

Experts say more people can now use it, and the new law could allow more families to save for college.

“We think it’s a very good thing as long as the planning is done properly,” said Wozniak.

That means saving the appropriate amount of money for school and not letting it run out too soon.

But some Hoosier families live paycheck-to-paycheck, and the 529 plan is just not realistic.

“This is the rule, not the exception. This is the main group where families say, ‘I would love to put that money away, I would love to have that 529 account but we’re just not able,’” he said

In that case INvestED said you should plan several years before college to see what schools your child may be interested in, what it costs, and what grants and financial aid programs are available.

There were some other changes that were discussed, but they did not make it into the final bill.

To be clear, graduate students will remain untaxed on tuition waivers, where they teach classes or help conduct research. And you can still claim $2,500 in student loan interest.

Consulting with INvestED is free by the way. For their information, click here.We’re examining the new tax law every Monday this month. Got a question for Eric?APP USERS: Click here to send your questions