NEXTGEN INCENTIVE

Parents of college students and many students themselves will have noticed a painful hole in their bank accounts this month caused by tuition payments. Parents and generous relatives of students as yet too young for college but who are thinking they’d like to go someday, preferably without the life-savings extraction, may take a lesson from this and start saving smartly now. The Finance Authority of Maine recently has made it easier to save.

Gov. King said yesterday that the state is willing to help qualified parents get started by offering small grants that will encourage the use of NextGen College Investing Plan, the tax-deferred account that allows participants to pick investment strategies and put in thousands of dollars a year with limited or no negative influence on a student’s financial-aid treatment. Each state has some version of these accounts, with Maine’s administered by FAME and managed by Merrill Lynch.

The announcement yesterday invites families with adjusted gross incomes of $50,000 or less to open NextGen with $50, which FAME would match with $200, and it is offering an annual inducement to save of a 25 percent match of contributions of at least $200, with the match worth up to $100 per beneficiary. If either the participant or the beneficiary of the account is a Maine resident, the annual fees are reduced. Parents who know they should start putting away money for their kids’ college costs but have not yet gotten around to it, now have an added incentive to act.

The reason for the incentive is straightforward. In an important study earlier this year, the Mitchell Institute found a top reason that students did not attend college is that, while they always intended to go, they had not properly prepared, perhaps because they did not know what proper preparation meant. One of the areas to improve, the institute’s report concluded, was to start saving earlier than most parents do.

Here’s how NextGen works: You go to a participating bank, savings institution or investment firm. You start an investment plan with as little as $50. And you designate a young child or grandchild or family friend as the beneficiary. Most banks are taking part in the plan. The name of the beneficiary can change over time and the student is not restricted to any particular college, in or out of Maine.

Just about all parents want their children to go to college, but too many students will graduate from high school with no clear sense of what to do next. If nothing else, a parent opening a college-investment account establishes a direction for these students, telling them that they too should start laying plans for higher education.