Examine excuses for skipping 529 college-savings plan

for education expenses.

This is disturbing. The average published charges for in-state college tuition and room and board was $20,770 for the 2017-2018 academic year, according to the College Board. Without taking into account inflation, that’s $83,000 for four years, if no financial aid is offered. For a private college, the price would be nearly $188,000.

“Every day people wait, they are falling behind,” said Danae Domian, an Edward Jones principal.

Families who lack savings often resort to taking out loans. This is also troubling, because a lot of people don’t know important details about their education debt, according to a Prudential Financial survey last year. Seventy-four percent of respondents were unsure about how much time they had to pay back their loans, and 53 percent didn’t know what their monthly payments would be.

Here are four of the top reasons parents give for why they aren’t investing in a 529.

Saving in a 529 will hurt my child’s chances of getting financial aid.

Under the Free Application for Federal Student Aid (FAFSA), a 529 plan can reduce a student’s needbased financial-aid package by a maximum of 5.64 percent of the account’s value.

“The benefits of investing in a 529 plan outweigh any other financial-aid concerns that parents would have — especially the younger the child,” said James Mahaney, vice president of strategic initiatives at Prudential.

Financial experts say I should concentrate on saving for retirement because I can’t borrow to retire, but my children can borrow to go to school.

This isn’t an either-or situation. You have to try to do both.

College graduates 35 and younger who have education debt spend 18 percent of their income on loan payments, and 60 percent of them expect that they’ll still be paying off their loans into their 40s, according to a 2016 survey by Citizens Bank.

“The reality is most of us have to have a combination: long-, intermediate- and short-term savings goals,” said Ken Hevert, senior vice president of wealth management at Fidelity.

If I invest in a 529 and my child doesn’t end up going to college, I’ll be penalized by the IRS.

If you don’t end up using the money in your 529 account for college expenses, you’ll have to pay ordinary income tax on the earnings when you take the money out. And there is a 10 percent penalty for a nonqualified withdrawal.

But the penalty and taxes are due only on the earnings, not on your contributions, which were made with after-tax dollars. (If your contributions received a state tax break, that’s a different matter.)

And instead of taking a nonqualified withdrawal, you could use the money for another child’s college costs.

I’ll have to pay a penalty if my child gets a scholarship.

OK, let’s say your child is awarded a $40,000 scholarship. The 10 percent penalty is waived for the full scholarship amount. You could withdraw the money and use it for whatever you like without paying the penalty. But you would still owe income taxes.

The cost of college is no joke. So, are you ready to stop making excuses now?