The New Jersey College Affordability Act may make college more affordable for some individuals in New Jersey. Here’s how it works.
To qualify, taxpayers must open and contribute to a New Jersey Better Educational Savings Trust (NJBEST) account, New Jersey’s 529 college savings plan.
Who Qualifies for the NJ College Affordability Act?
Taxpayers with a gross income of $75,000 or less will be eligible for a one-time grant of up to $750 in a dollar-to-dollar match of the initial account deposit.
Taxpayers earning $200,000 or less become eligible for a gross income tax deduction for the amounts contributed to the NJBEST account. Deductions will not exceed $10,000 in contributions. They also become eligible to deduct the amounts paid toward in-state tuition (not exceeding $10,000).
All eligible taxpayers would also be allowed to deduct up to $2,500 from gross income for the amount of principal and interest paid on a student loan, under the New Jersey College Loans to Assist State Students (NJCLASS) Loan Program.
Why the NJ College Affordability Act Was Passed
The bill was unanimously approved by Senate, in an effort to make college more affordable and provide financial incentives for pursuing education.
Many universities froze tuition during the COVID-19 pandemic. However, many major institutions are now raising tuition for the 2021-2022 school year, once again providing financial challenges to students.
According to Forbes, the cost of attending a traditional four-year university has been rising at twice the inflation rate, and two-year community colleges a third faster.
Here are some statistics according to the National Center for Educational Statistics about the cost of a bachelor’s degree:
- In 1985, a bachelor’s degree cost an average of $5,504 per year.
- In 2017, it cost $27,357.
- In 2020-2021, the average cost at a private college was $37,650.
For the 2022-2023 school year, NJ colleges increased tuition and fees by an average of about 3%, according to an NJ Advance Media analysis of tuition rates provided by the schools. Nationwide, the average published tuition and fees for full-time students paying in-state vs. out-of-state tuition increased by 1.8% and 2.2% respectively (before adjusting for inflation).
Real median household income, even factoring in inflation, has never risen at these rates.
Every college savings plan has its pros and cons. To learn if an NJBEST account is right for you and your children, contact your wealth advisor.
This article was originally published in 2021 and updated in February 2023