From paycheck to pathway: Leveraging direct deposit to build education savings
Over the past several years, the list of qualified education expenses for education savings plans, commonly known as 529 plans, has expanded significantly. These accounts are no longer limited to traditional college tuition. Your savings can now be used to pay for K-12 expenses at public, private, or religious schools, postsecondary credentialing, and for education loan repayment up to a $10,000 lifetime maximum per beneficiary.¹ After maintaining your account for at least 15 years, you may be able to roll over funds to a Roth IRA for the beneficiary, free from taxes or penalties.
In a state like Alaska, where accessing education and training can require significant time, travel, and expense, this flexibility matters. It creates more opportunities for individuals to invest in their own professional growth, as well as in the futures of their children and families.
While there are many ways to save, one of the simplest and most effective is through payroll direct deposit. For example, setting aside $75 from each paycheck into an Alaska 529 account is a relatively small, manageable amount, but consistency is what makes the difference.
Over time, those contributions may add up. Saving $75 per paycheck results in about $1,950 each year. Over 18 years, that totals roughly $32,000 without any investment growth. If the same amount potentially earned an average annual return of 6% in a tax-advantaged account, those same contributions could grow to approximately $58,000.2 That is the power of starting early and saving consistently.
Payroll direct deposits make this process automatic and predictable. It also creates an easy opportunity to increase savings over time, whether by adjusting contributions with a cost-of-living increase, directing a portion of a bonus, or adding occasional “extra” contributions from gifts or other windfalls.
How do I set up direct deposit from my paycheck?
1) Open an Alaska 529 education savings plan account.
2) To set up direct deposit to make a single or recurring contribution, please provide the following information to your employer:
- The routing number: 011001234 (The Bank of New York Mellon)
- Your 9-digit Alaska 529 account number with a 704 prefix (example: 704A8XXXXXXX)
- Select checking
- Add the amount to be deducted per pay period
The deposited funds will default to your allocation settings for your account. To set future allocations, log in to your account and click "View Details" under the selected beneficiary.
In the end, building education savings doesn’t require large, one-time contributions. It starts with consistency. By making it easier for employees and families to save directly from their paychecks, districts can help create stronger financial foundations and expand access to education and training opportunities across Alaska.
Accounts opened and funded with at least $25 in 2026 may receive the $250 Dash to Save® incentive. Individuals who contribute through recurring methods, such as payroll direct deposit, may receive an additional $100 Dash to Save More® incentive each year they actively contribute through this method.
Contact our Alaska 529 Workplace team at alaska529@alaska.edu to find out how we can help you and your employees plan and achieve their education savings goals.
About the Author: Lael M. Oldmixon, M.Ed., is the Executive Director of the Education Trust of Alaska. She is a parent of an 8th and 10th grader, and a long-time advocate of post-high school education and training. She has worked for the University of Alaska for nearly 20 years. Her goal is to help Alaska families understand the various strategies for making education and training after high school affordable and attainable.
Dash to Save and Dash to Save More are trademarks of the Education Trust of Alaska.
1While distributions from 529 college savings plans for elementary or secondary education expenses are federally tax-free, state tax treatment will vary and could include state income taxes assessed, the recapture of previously deducted amounts from state taxes, and/or state-level penalties. You should consult with a tax or legal professional for additional information.
2All investments are subject to market risk, including loss of principal.
