3. Don't forget state tax deductions and credits: In addition to any grants states offer, state income tax breaks can help boost college savings. Outlaw loves declaring her Idaho state income tax deduction for 529 contributions.
Up to $4,000 can be deducted from her income on her state tax return as a single person. If the money saved by a single parent on income tax was deposited into a 529 plan, thousands of dollars could be added to college funds.
If a state has a 7 percent income tax rate and a parent contributes $4,000, he or she would save or get a refund of $280. Depositing that $280 into college savings each year for 10 years adds up to $2,800, before any interest is earned.
However, families should choose the 529 plan the state offers instead of a plan from another state in order to qualify for tax benefits, Foster says. Most states require families choose the state's plan in order to claim tax deductions or credits, she says.
Outlaw did choose her state's 529 plan. Reinvesting the tax deduction as well as investing more as her salary increased has become part of her overall college savings strategy for her daughter's education.
"My parents sent me to college debt-free," she says. "I want to do the same for my daughter."
Trying to save for college? Get tips and more in the U.S. News College Savings 101 center.