If an education is priceless, why does it hurt so much to pay for it?

According to Savingforcollege.com, the last 10 years have seen an annual increase of 5% for 4-year college tuition and fees. To put that in perspective, if the average annual cost of a private college is $32,405 this year (don’t blame the messenger!), that means 10 years ago it was $19,894. That’s an increase of nearly 63% over the time period.

Graduates and their parents are going into considerable debt. How much? According to Marketwatch, there are 40 million students and grads who have $1.2 trillion in education debt.

If you’re interested in calculating the projected cost of college and how much you need to save, here is a helpful online calculator that you can scream at in the privacy of your own home when it tells you the figure.

Here’s some good news: Congress enacted laws in 1996 that established the 529 plan industry designed to encourage saving for future college costs. Smart financial planning can lead to a wider array of college options for your kids that won’t disrupt your retirement planning or send your children into a lifetime of debt.

Here are 5 things you should know about starting a 529 plan:

1. Am I giving away the money I put in the 529? No! You remain the owner of the assets and you will name somebody as a beneficiary. You can even name yourself as the beneficiary.
2. How much can I put into a 529 account? Each individual is allowed to put up to $14,000 per beneficiary per year. You can also amp up the 529 by giving up to five years’ worth of contributions without triggering the gift-tax.
3. Are the earnings really tax-free? Kind of. The earnings grow and can be withdrawn federal tax-free if used for qualified expenses like tuition, room and board. Some states tax the earnings if you have a plan that is located in a state other than your resident-state. And remember: your contributions are not taxed on withdrawal.
4. What if I change my mind? The assets are yours, so you can take them out. You will pay tax and penalties on the earningsportion of the account, but not on your contributions.
5. Are there different 529 plans?Almost every state has a plan, and there are differences in fees, performance, options available and so forth, so it pays to take some time to figure out which one is right for you.

Interested in reading more? Try the cleverly-named savingforcollege.com website for a good resource for issues on saving for college. Speaking with a wealth advisor will help you design an asset management plan to best achieve your goals and, ultimately, the goals of your children.