How to take advantage of TOPS and START for college

When I attended Southeastern Louisiana University, I worked several jobs to help pay for my college education.  There was no TOPS program when I was in school, and we didn’t have easy access to student loans.  Financing for college was pretty limited; you either paid for everything out of pocket or you depended on savings.

Today, many Louisiana families depend on TOPS, at least for tuition costs, and it looks like the program will be around for a while.

TOPS doesn’t cover all college expenses, however, so it’s good to have additional savings set aside.

You can open a college savings account through the Student Tuition Assistance and Revenue Trust (START) program.

The program can be used to save money tax-free for tuition, room and board, books and fees.  START can be used to pay expenses at any higher education institution or Louisiana Technical College school.

START is called a 529 plan, and most states operate similar programs.  Louisiana’s program is arguably one of the best in the nation, however.

The minimum deposit to open a START account is $10, and there are no fees to participate in the program.  Parents, grandparents and other individuals can open accounts for children.

The program offers a variety of tax benefits.  Up to $2,400 in deposits can be deducted from taxable income reported to the state, or if the account owner files a joint return, the amount is $4,800.  Earnings are tax-deferred, and withdrawals for qualified expenses are exempt from state and federal taxes. Your START beneficiary pays no taxes on their disbursements, and you can change beneficiaries without tax consequences, provided that the new beneficiary is a member of the family of the previous beneficiary.

You can use START to invest in a variety of options — ranging from very conservative to aggressive — depending on the age of your dependent and how soon he or she will be entering college.  Louisiana matches your investments from 2 percent to 14 percent depending on your income.  The highest match is available for families who earn less than $30,000 a year.

A new federal tax change makes 529 accounts even more beneficial to parents by allowing for the creation of savings accounts for the payment of K-12 private school tuition.  Louisiana will roll out its START K-12 savings program statewide this year, but in the meantime, the option is available to families who had START accounts as of December 31, 2017.

Those START account owners are able to request a one-time disbursement of up to $10,000 for K-12 expenses.  Such disbursements cannot exceed the START account balance as of December 31, 2017, nor can they exceed the current account balance.  As of September 6, 2018, there have been 396 disbursements for the payment of K-12 expenses totaling more than $2.5 million.  There is no state tax break or state match for the K-12 program, but there are federal tax advantages.

At the end of the last year there were 59,774 START accounts and $841 million in assets.  If you don’t already have a START account, I highly encourage you to consider opening one.  For more information, visit www.startsaving.la.gov or email start@la.gov today.

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