Paying for college is rarely an all-or-nothing proposition. That’s because few students receive full scholarships, and many families cannot afford to pay the complete cost of a four-year college education out of current income.

For most families, paying for college involves a three-pronged approach:

• Financial aid: With college costs rising every year, a higher education is becoming harder than ever to afford for students and their families. Use this Financial Aid One-Pager to get educated about the high cost of higher education.
• Loans
• Savings

The exact mix of the three matters and greatly influences the true cost of college.

Most families will receive some financial aid, but the exact amount won’t be determined until the student approaches college age. However, that doesn’t mean you should delay planning or put off saving altogether.

Avoiding Unnecessary Loans

Families that don’t start early and save often to prepare for college costs typically rely more heavily on loans, and are stuck paying back the principal and potentially significant added interest for decades following graduation.

Save Early, Save Often

Those who start saving well in advance of their child’s college years – even as little as $25 a month – can potentially reduce their out-of-pocket cost significantly.

The reason is simple: every dollar saved is a dollar families won’t have to borrow and pay back later – with interest.

A 529 plan offers tax advantages. Money used for qualified higher education expenses is not subject to federal taxes. Plus, there are possible state income tax benefits, depending on your state of residence.*

In addition, money in the account is professionally managed in pursuit of growth and can potentially benefit from compounding over time. Any money the account earns can be automatically reinvested and potentially generate additional dollars because of compounded interest.

Learn more about college savings strategies and 529 plans managed by OppenheimerFunds by visiting:

* When withdrawals are used for non-qualified expenses, the earnings portion of the withdrawal will be subject to ordinary federal, any applicable state income tax and an additional 10% federal tax penalty.