Student Financial Aid from New Jersey’s HESAA

Getting ready for school? Wondering what is available for Student Financial Aid in New Jersey? The New Jersey Higher Education Student Assistance Authority (HESAA) helps students like you find the financial aid that they need in order to get a higher education. With their mission of “Providing students and families with financial and informational resources for students to pursue their education beyond high school,” HESAA seeks to provide opportunities for that might not otherwise be available through student loans, scholarships and grants.

As you can see in the infographic above, HESAA provides financial aid through many different channels. If you are looking for programs to help you save for college, you may consider looking into the NJBEST program, which helps families plan and save for college.

A popular program used by about ⅓ of New Jersey’s college undergraduates, the Tuition Aid Grant (TAG) program is a need-based grant that may cover up to the cost of tuition based on financial need, cost of attendance, and available funding.

If you are looking for Scholarships, and were part of the top 15% of your class during Junior or Senior year, the NJ STARS program can help you. Created with New Jersey’s highest achieving students in mind, the NJ STARS award can cover the cost of tuition for up to 5 semesters of continuous full-time enrollment in a degree program.

For help getting started, or just to learn more, visit HESAA.org.

When Should I Start Saving for My Child's College Education?

If you’ve ever looked at How Much College Actually Costs, you probably wonder just how early you should begin saving for your child’s college education. Here at HESAA, we wanted to help you answer that question. The truth is that the short answer is:

Start Saving for College as Soon as Possible.

That being said, let’s look at the long answer. Your ability to save for your child’s future education has a lot of influencing factors. First, before looking at saving for college, you need to be taking care of your current financial obligations, including all of your livings expenses and your current debt payments.

Next, you need to determine which savings goals matter most to you.

For example, you may want to figure out if you think it is more important for you to save for your child’s college education or for your own retirement. For many, saving for retirement takes precedence over college savings because they don’t want to become a financial burden on their children later in life and there are other financial opportunities that can help pay for college that are not available for retirees. Many financial advisors also suggest that you have a “rainy day” fund with 3-6 months worth of income in it and an emergency fund for large, unexpected occurrences like car repairs or medical bills.

You can, of course, start saving in each of these areas, because saving for one does not preclude saving for the others. However, determining your priorities will help you decide how much you can put into each savings category.

Why Should I Start Saving Early?

It is our opinion, however, that you should begin saving for your child’s education while they are still young. You may not be able to save enough money to pay for college outright, but anything you are able to save doesn’t have to be made up later using Grants, Scholarships, or Expensive Student Loans.

Interest Rates Make a BIG Difference.

Another reason to start saving early is that the length of your investment, coupled with compound interest adds up. Looking at a few savings examples will help illustrate why saving early can pay off.

If you start saving for college when your child is born and save $100 per month in an account that receives 1% compound interest, by the time your child turned 18, you would have invested $21,600, resulting in nearly $23,800 after interest.

On the other hand, if you wait until your child is 5 years old to start saving and put the same $100 per month away with the same 1% interest rate, you will have invested $15,600, resulting in close to $16,800 after interest.

In these examples, saving sooner resulted in much higher investment levels, of course, but the additional interest also resulted in an extra $1,000. If you are able to find a higher yielding investment, that difference grows exponentially. If we look at the same $100 per month investment at a 3% interest rate, it would result in over $28,800 over 18 years or just over $19,200 over 13 years.

As you can see, starting to save for your child’s education early can make a big difference in how much you can help them pay for college. Here at HESAA, we want to help you Plan for Your Child's Future. If you’re ready to start saving for you child’s future, you may want to look into qualified tuition plans like NJBEST, New Jersey’s 529 College Savings Plan.

About NJBEST: New Jersey’s 529 College Savings Plan

What Are 529 Plans?

Originally created in 1996, Qualified Tuition Plans — commonly referred to as 529 plans or 529 college savings plans — are tax-advantaged savings plans designed to make it easier to save for college or other post-secondary training. The moniker of “529 Plans” refers to section 529 of the Internal Revenue Service (IRS) code, which provided for the establishment of these plans.

There are two different types of 529 plans, but each must be set up with a designated beneficiary. The first type, a prepaid tuition plan, can generally be used to purchase credits or other approved units at participating colleges and universities. When the student begins attending school, they can use these prepaid credits toward tuition and fees. These plans can be beneficial because they lock in tuition prices at eligible schools. However, they are limited on what they can be used for and where they can be used. Many also have restrictions on the age or grade of the beneficiary.

College Savings Plans, on the other hand, tend to be more flexible. Tuition rates are not locked in because the funds are not designated for specific schools. There are no age limits on who they can be opened for and they can be used to cover all “qualified higher education expenses,” including:

• Tuition and Fees
• Room and Board
• Required Books and Computers

If you are interested in using a 529 plan to save money for college, make sure you look carefully into the pros and cons of each type of plan and pick the one that best fits the needs of you and your future student.

NJBEST: The New Jersey 529 College Savings Plan

The New Jersey Better Educational Savings Trust, NJBEST for short, is a 529 College Savings Plan created by the state of New Jersey. It has the flexibility of all 529 College Savings Plans, but also offers some exclusive benefits just for New Jersey residents.

Flexible Savings

First, you don’t have to worry about your savings being wasted. You, as the plan owner, get to decide how and when your assets are spent on higher education expenses. In fact, if your chosen beneficiary chooses not to pursue higher education, you have the ability to use the funds to educate another family member (read the Investor Handbook for details). And, since the funds can be used at any accredited college, you don’t have to worry about what school the student chooses to attend.

Potential Scholarship of up to $1,500

In addition to your savings, the NJBEST program offers students the potential of receiving a college scholarship of up to $1,500. This tax-free scholarship is available to many students at New Jersey colleges and universities. The value of the scholarship increases with the time and investment of your NJBEST savings plan.

Limited Interference with New Jersey Financial Aid Eligibility

One key feature of the NJBEST 529 College Savings Plan is that there is limited interference with other New Jersey Financial Aid. The plan is structured so that the first $25,000 in savings is excluded from the criteria used to determine financial aid eligibility in the state of New Jersey.

Low Minimum Contribution - High Contribution Limits

You don’t have to be able to save a lot to get started. In fact, you can start your NJBEST savings plan with as little as $25. Once started, you can continue to make contributions to your college savings plan until the plan’s value reaches $305,000, making sure that you can save plenty of money for your future student’s education.

Tax Advantages

Your NJBEST savings plan grows free from federal income tax and New Jersey state income tax. Qualified withdrawals are not typically subject to these taxes either. If others wish to make a large contribution to your beneficiary’s 529 savings plan, there is often special gift and estate tax treatment. A single-year contribution of up to $70,000 ($140,000 if given by a married couple) is generally excluded from federal gift and estate taxes. However, the contributor can make no further gifts to the beneficiary for five years under these circumstances.

College is expense and the rising cost of tuition means that it will only get more so. You can invest in your child’s future by opening a 529 Plan.

Sources:

https://www.sec.gov/investor/pubs/intro529.htm
https://www.irs.gov/uac/529-plans-questions-and-answers

1. Investing in NJBEST savings plans does not guarantee admission to any college, either in New Jersey or elsewhere.
2. NJBEST scholarships are awarded during a beneficiary’s first year of college.
3. Tax benefits are conditioned upon meeting certain requirements. Nonqualified withdrawals and particular circumstances may not result in tax benefits. Always consult a tax advisor before investing.
4. As with any investment, 529 plans have risks associated with them that can cause investment return and principal to fluctuate.
5. Please read the Investor Handbook for more information on NJBEST College Savings Plans.