Students should still fill out the Free Application for Federal Student Aid whether or not they plan on getting loans or even accepting grants. This form is also used to evaluate students for scholarships from the community college.
If a student earns a $1,000 scholarship from the community college, parents who are paying cash would be able to deposit an extra $1,000 into the student's 529 plan for the last two years of school.
[Get tips for being successful in community college.]
4. Budget tightly: The savings from starting off at a community college doesn't just come from tuition. Skipping dorm life can nearly eliminate room and board expenses, which can add up to thousands each year.
"If the student can live with parents while attending the community college, that will save the family the cost of residence halls or off-campus apartment rent," Lewis says.
However, students can still rack up costs if they don't watch other parts of their total budget: transportation, dining out and entertainment. Families need to come up with a total budget that allows 529 plans to be untouched until students enter their junior year at a four-year university.
Trying to save for college? Get tips and more in the U.S. News College Savings 101 center.