How can you possibly save enough for your child's college education when tuition is rising by at least 4 percent a year, risky investments like stocks have been sickeningly volatile, and safe investments like certificates of deposits are paying only about 1 percent?
Good news: a few rebate programs offer parents a chance to turbocharge their college savings— painlessly. And parents who can persuade grandparents, aunts, uncles, or friends to join them in signing up for these free programs can build up hundreds of extra dollars in savings every year.
[Read the four steps to squeezing the maximum from rebate programs.]
The recession and tough new consumer protection rules wiped out several rebate programs. But three major college savings rebate programs are still operating:
1. Upromise: Parents and anyone else they recruit can register their grocery loyalty cards for free at Upromise.com. Anywhere from 1 to 3 percent of the value of the purchases will be rebated to a Upromise 529 college savings account in the name of the student the customer chooses. Webshoppers who start their search at Upromise can earn extra rebates of anywhere from 1 to 25 percent on certain sites. To supercharge college savings, parents and others can also apply for and use a Upromise credit card linked to the student's account. Those cards generate additional rebates of at least 1 percent of all purchases. Some of the rebates are much larger: Upromise rebates up to 10 percent of the value of some grocery or restaurant charges, for example. To further accelerate savings, at the end of the year, Upromise will add a matching 10 percent of the year's rebates to students who have at least $5,000 or make regular contributions to the company’s “high-yield” savings account. Upromise also allows members to direct rebates to reduce Sallie Mae student loans. Parents can also ask for their rebates as checks to pay for any expense.
2. Fidelity 529 rebate card: Parents, grandparents or others who use Fidelity's American Express card can get 2 percent of their purchases deposited in a Fidelity 529 savings account, IRA or investment account. Customers who just want checks get rebates of up to 1 percent. Fidelity also offers a Visa card that rebates1.5 percent to an investment account.
3. BabyMint: BabyMint no longer offers a credit card, but members who sign up for the site's free shopping rebate programs and webshop through the site can get rebates of, for example, 2 percent from Walmart, or 7 percent from eBags, directed to any college savings plan of their choice, or have checks sent directly to them.
[Read about other ways to get free college savings cash.]
Of course, anyone hoping to benefit from any rewards credit cards should pay the bills off in full and on time every month. Those who don't will end up paying fees and interest far in excess of the rebates.
[Read about the pros and cons of prepaid college savings plans.]
In addition, while Fidelity and Upromise encourage customers to keep their rebates in the companies' proprietary 529 accounts, parents who research their options may prefer the benefits of tax breaks and lower fees offered by other 529 savings plans, such as Ohio's highly rated CollegeAdvantage 529 Savings Plan. Anyone can invest in the Ohio plan, which offers some of the lowest cost funds of any 529. And Ohio residents can take a deduction for their 529 contributions on their state taxes.
Alternatively, some parents prefer to put the bulk of their college and retirement savings in Roth IRAs, since that money can be withdrawn without penalty or either retirement or education expenses.
[Search for the best 529 savings plan for you.]
Given those caveats, Joe Hurley, founder of savingforcollege.com, says parents may as well try as many of the free rebate programs as they can.
Parents who don't mind the hassle, and are really disciplined, can take the rebates in cash and deposit them into their preferred college savings or Roth IRA accounts. Otherwise, to make sure the money is saved, parents can have the money automatically funneled into lower-cost fund options that Fidelity and Upromise offer.
Updated on 10/20/2010: An earlier version of this story omitted some details about the rebate programs.