When you think of funding for college, the first program that usually comes to mind is most likely TOPS, and understandably so. TOPS has been instrumental in giving Louisiana students access to higher education opportunities. But there’s another program in the state that may not get as much attention as TOPS but is equally successful in helping students and families plan ahead for college expenses.
It’s called the Student Tuition Assistance and Revenue Trust Program (START), and it’s a 529 college savings plan designed to help families contend with the growing costs of educating their children after high school. States operate 529 plans under IRS rules to incentivize saving money for college expenses.
Parents, grandparents and individuals can open a START account with a $10 deposit. College students who want to benefit from the program can even open accounts for themselves in certain circumstances.
The tax advantages of opening a START account are numerous. When you make deposits into the program, the amount is deductible from the income you report on your state tax return up to $2,400 per account each year. If you are married and file a joint tax return, the amount you can deduct from your income increases to $4,800 per account.
Investment earnings on these deposits are tax-deferred while they remain in a START account. When withdrawals are made to pay for qualified expenses such as tuition, fees, room and board, and books, they are exempt from state and federal taxes as well. Like an interest bearing checking account, anyone can make a deposit into an account, but the person who opened the account is the one who earns the interest.
One of the greatest benefits of START is what we call “earning enhancements.” This is where the state matches a portion of deposits into a START account by 2 percent to 14 percent based on an account owner’s income and the account category. The highest match of 14 percent is available to account owners with an income of $29,999 or less.
START has gone from 2,966 accounts and $3.9 million in total deposits in the 2000 Calendar Year to 56,204 accounts and more than $718 million in total assets by the close of the 2016 Calendar Year. This past Calendar Year, fixed income investments in the program earned a rate of return of 1.6 percent, and equity investments in START earned 4.58 percent to 18.3 percent depending on the investment option chosen.
START has performed so well over the years that SavingForCollege.com ranks it first of all 529 plans in the nation for 10-year performance. The program was also ranked in the Top 10 for 1-year, 3-year and 5-year performance.
I’ve only scratched the surface of the many benefits of the START Savings program. I encourage you to learn more about the program and boost your college savings goals by visiting www.startsaving.la.gov.