College savings for adults

stack of books, a green apple and money
  • Matched savings plans offer flexibility of use
  • Prepaid tuition plans a good hedge against tuition hike
  • 529 college savings plans allow broad college selection

Working adults weighing their money-saving options for an encore college appearance shouldn't exclude prepaid tuition and savings plans.

Adult learners frequently overlook prepaid plans like those that take advantage of Section 529 of the U.S. tax code, says Kelly Tanabe, author of "501 Ways for Adult Students to Pay for College."

"When adults think about saving for college, they tend to think a 529 plan only applies if you're sending a child to school," Tanabe says. "Even if you only have a few years, a [prepaid] plan can be a good vehicle because it's guaranteed and your money isn't taxed."

To be sure, many older workers contemplate continued education and quickly hit the books after deciding to return to school. But for those who plan several years ahead, below are four easy methods of saving for college.

1. Matched savings accounts offer flexibility of use 

Denise Hickmon, a 40-year-old administrative assistant from Washington, D.C., found a way to quadruple her money without risking a penny. She invested $1,000 in an Individual Development Account, a matched savings program offered through the nonprofit Corporation for Enterprise Development, or CFED, and gained an additional $3,000 to help pay for her final semester at Catholic University.

"I make about $38,000 a year and have four children, so I couldn't pay for tuition on my own," Hickmon says. "I was applying for scholarships, but the money was running out. The (IDA) program helped me to graduate."

Available in more than 540 locations across the U.S., IDA programs help low-income families build long-lasting financial assets by matching savings of up to $1,000 to be used for education, career training, a down payment on a home or as start-up capital for a new business.

IDAs are funded by a wide range of nonprofit organizations, private companies and government agencies -- the Department of Health and Human Services being one of the largest sources. These saving instruments emerged in the early 1990s as a way for low-income households to permanently break the cycle of poverty.


Modeled after 401(K) matched-savings programs, IDAs are offered in 19 states, according to the Federal Deposit Insurance Corp. They also are administered through a wide array of community and economic-development groups like the Washington, D.C.-based CFED, various local governments and select financial institutions, including banks and credit unions.

Before receiving the savings match, IDA enrollees are required to make regular contributions to the account for a minimum of six months and take free financial literacy classes that teach basic savings and asset management skills.

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