When families start saving money for college, gift cards are not typically the first place to look for funds.
But now there may be a good reason to do so.
Two online businesses — Gift of College and Card Cash — launched a program in late May that allows users to convert unused gift cards that may have been buried in sock drawers into funds that can be deposited directly into a 529 college savings plan or a student’s loan account to pay down debt.
While tapping gift cards to build the college fund may be offbeat, consider that more than 93 percent of Americans received gift cards over the past year, with many of them still unused. According to the consulting firm CEB TowerGroup, more than $1 billion in gift cards from 2015 alone remains untouched.
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Gift of College and Card Cash have strong educational ties. Gift of College operates an online gift registry that allows family members and friends to contribute to an existing new college savings plan. Meanwhile, Card Cash has created a large online marketplace for exchanging gift cards.
More than 200 merchants, including the likes of Wal-Mart, Starbucks and The Home Depot, now participate in the Gift of College exchange program. Go to the Gift of College website at www.giftofcollege.com and create an account that will be linked to a 529 or student loan account.
Then determine the exchange value for your gift card, based partly on the brand and remaining balance. Notice that there is no obligation to follow through if you feel the offer is too low.
If you accept, the card will be exchanged for a Gift of College e-card and proceeds will flow into your account. The old card doesn’t need to be mailed back, and customers can exchange up to $500 worth of cards every 30 days. Gift cards with expiration dates are not eligible.
Here are three other overlooked or quirky options to enhance your college nest egg:
Users typically take advantage of their social networking connections to create a funding campaign complete with video and photos and a realistic money goal.
One downside is that some crowdfunding sites charge fees on donations.
▪ Loyalty programs: Upromise offers one option — earn cash back on purchases at grocery stores, restaurants, airline tickets and more. Just don’t overspend to rack up points.
In addition, several companies, including the Monetta Young Investor Fund, partner with Sage Scholars Inc. to offer tuition rewards programs. With Monetta, for example, the goal is to build points through investing. Those points can then be redeemed for tuition discounts from nearly 350 participating schools around the country.
The tuition discounts, however, are limited to those schools, and there are other caveats, so read the fine print carefully.
▪ Roth individual retirement account: Any child can open a Roth as long as the contributions are generated from earned income, such as babysitting or working at a fast-food restaurant. While there are no front-end tax breaks, contributions can be withdrawn tax-free if used for qualified educational expenses, such as tuition, fees and books. For 2016, kids can contribute up to $5,500 into a Roth.
Steve Rosen: 816-234-4879