When students save money for college, there are a number of things they can do with their nest egg. It may be tempting to hide college money in a can under the bed where it can be counted often and carefully monitored, but it does not gain interest or help pay down school expenses. Instead, students should make their college savings work as hard as they do. Here are 4 ways to do just that.

Make it Grow

One way to make college savings grow is to put the money in a place where it earns interest. The simplest solution is to open a high-yield account at the bank. The higher the interest rate offered, the more money the account will earn. Some financial institutions offer special accounts for students. There is usually a minimum balance required to avoid service charges. There may be restrictions on how often the money can be withdrawn. If the student begins the savings account before they turn 18, the bank or credit union may require an adult to act as a custodian or guardian on the account.

Pay Down a Loan

When college students are earning a regular income through a part-time job, it takes careful thought to decide what to do with the money. This is especially true if they already have a private loan to assist in paying for college. It may be tempting to spend the money on food, travel and entertainment. A more practical idea, however, is to pay down their existing college loan. The faster the loan is paid off, the less interest the student pays. There is usually no penalty for making early payments, but there is one for making late payments.

Schooling Expenses

Paying for school means more than just tuition. Other expenses include room and board, books and meals. Most schools now require every student to have a computer. Depending on the student’s major, school supplies for class projects can be quite an expense as well. All of these are requirements that cost money. Using the college savings earned by working during the summer or on weekends can be used to pay for schooling expenses throughout the school year.

529 Plan

The federal government allows a number of tax breaks and tax-deferred plans to help people save money for college. One of the most useful is the 529 plan. The money is put into an account controlled by the donor, not the beneficiary. For example, parents can set up the fund for their children’s education. Contributions into the account cannot be deducted on the federal tax return, but the money comes out federal tax free. These plans can be set up through the state or the institution of higher learning.