How To Make Money While in Grad School – Saved Nearly 5% on Tuition

We can deduct our 529 contributions because I live in Illinois. I’ll show you how to make money almost instantly while in graduate school.

My tuition was decreased by nearly 5% thanks to an Illinois 529 tax deduction. Most individuals believe that investing in a 529 plan requires long-term commitment, but this is not the case.

The rules for deducting your 529 contributions from your taxes vary by state.

In Illinois, a 529 tax deduction is worth up to $10,000 for a single filer and $20,000 for a joint filer. For different reasons, certain states allow lesser deductions while others do not.

My job did not cover the cost of graduate school, so I needed to save every penny I could. Most families consider the 529 Plan as a prospective college savings vehicle in a positive light. When their child is born, many parents may open an account and begin investing money on a monthly basis. After 15-20 years, the money will have grown and the proceeds can be used to pay for education tax-free. That’s fantastic…keep it up!

I, on the other hand, didn’t have the luxury of waiting 15-20 years for it to compound. I was now working on a master’s degree. However, my accountant told me that I couldn’t deduct my tuition because obtaining a degree was not required to keep my employment. I kept looking for ways to save money because I am a frugal person.

Then it dawned on me!

Who says I have to put my money in the Illinois 529 Plan for a long time to get the benefits?.

Illinois 529 plan tax deduction steps I took:

  • Opened an Illinois 529 account at BrightStart Savings online – it’s so easy. The form is simple and you can even make your first deposit using your checking routing number.
  • To get the process started, I put $100 into the account. Then I looked at the various investing fund possibilities, which included everything from all stocks to all bonds to cash to a mix. Finally, to limit market risk for those two days, I chose the bond fund. I wanted to minimize my exposure if the stock market was erratic for those few days. For longer-term investors, I recommend the Vanguard Age-Based fund, which has some of the lowest costs and gradually shifts your investment from equities to bonds as your children approach college age.
  • Over the summer, I received my first tuition bill, which was around $6,000 in total.
  • I transferred $6,000 from my checking account to my Illinois 529 account just before the deadline.
  • The account was cleared in just a few days. So I went online and requested a $6,000 reimbursement check for approved school expenses.
  • I received a cheque from Brightstart Savings in a very short period of time.
  • I paid the graduate school tuition over the phone with a credit card in order to get my airline miles. My favorite credit card is the Southwest Rapid Reward credit card.
  • Finally, a month later, I drafted a check from my checking account to pay off my credit card payment with the $6,000 I had been refunded.
  • BrightStart receives my tax paperwork in the beginning of the next year, and I am eligible to deduct $6,000 from my Illinois state taxes. The tax reduction I owe Illinois is $6,000 x 4.875% = $292.50. This is referred to as an “under the line” deduction by accountants.

Try not to wait until the end of December for 529 plan transfers.  I know summers can be busy with enjoyment and chores like cleaning your deck or dealing with messy drains, but this is very important.  I had a year where a mailing and fax got misplaced and my funds did not get transferred in time for tax purposes.  Make the time ahead for planning yout Illinois 529 plan tranfers.

Additional tips and tricks to get a Illinois 529 plan tax deduction. 

When requesting a distribution from a 529 plan, you typically have three options:

  • It is possible to make the monies payable to the account holder. If you’re the parent who set up and manages the account, for example.
  • The funds can be made payable to the student or the account’s beneficiary.
  • The money can be made out to the appropriate college.

I was unmarried when I initially started graduate school, so I could only deduct $10,000 per year from my state taxes. In November/December of my first year, I received my next tuition bill for the winter session. By making a $4,000 payment to BrightStart Savings by December 31, I was able to spread out my payments. I was able to reach the maximum $10,000 in a single calendar year as a result of this. The remaining $2,000 was then invested in my IL 520 account in January. In the end, for less than an hour of work, I saved $487.50 and earned some airline points.

The following year, I married and was able to deduct up to $20,000 every year, saving me $975 in total. Everything seemed mechanical at this point, and it was the simplest $1,000 I’d ever made…or saved. A dollar earned is a dollar saved, as the old adage goes.

Do employers receive an Illinois 529 credit for contributing per employee?

Yes, employers in Illinois are eligible for a tax credit of up to $500 per contributing employee. Employers can contribute up to 14 percent of employee contributions to 529 tuition plans each year. **Consult your accountant and the program’s details.

What are the 529 plan Illinois pros and cons?

The advantages of putting money into a 520 plan account far outweigh the disadvantages.

The 529 Plan Pros:

  • 529 plans are tax-advantaged savings accounts.
  • To grow your investment, you can invest in stocks, bonds, cash, or a balanced approach.
  • Option for automatic monthly investment
  • Your contribution to the investment pool is unrestricted.
  • 529 programs allow you to move your money from one state to another. In a different state, you might find a superior fund, reduced costs, or tax benefits.
  • You can reassign the funds to a different beneficiary, such as a grandchild or a spouse, without incurring any penalties.

The 529 Plan Cons:

  • The 529 savings money must be used for education. Any money used outside the plans parameters will results in a 10% penalty plus you’ll be taxed on the gains.  You can’t use the money for Last-minute Southwest Airlines deals.
  • That might be a deciding factor in financial aid eligibility.
  • Your investment alternatives may be limited in some states.
  • The fees on various investment options can vary tremendously


We explain how to make money in grad school, almost instantly.  The truth is, you can apply this technique on reduce college costs to undergraduate schools, private high school tuition, doctorate degree, and anywhere else that accepts 529 plan investments.  Always consult your state 529 plan and your tax consultant for your situation.

Please share any other ideas you have for making money while in graduate school.

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