July 17, 2007
529 College Savings Plans – what are they???
Lots of people have heard of a 529 College Savings Plan but many have no idea what these plans offer or what these plans might cost them.
StudentLoanNetwork.com has a great article on what a 529 plan actually is. The article is rather long, but it’s well worth reading the WHOLE thing!
“Named after the section of the federal tax code that governs them, 529 plans are tax-advantaged programs that help families save for college. Selecting a plan requires homework. Almost every state offers at least one 529 plan, and the tax advantages, investment options, restrictions, and fees can vary a great deal. Beginning in 2002, even more choices may become available, as many colleges will be able to offer 529 plans too…
There are two types of 529 plans – prepaid tuition plans and college savings plans. Every state offers at least one of these types of plans or is developing one. Some states offer both, and many of these plans are open to non-residents.
Prepaid tuition plans allow parents, grandparents, and others to lock in today’s tuition rates at any of a state’s eligible public colleges or universities so that they don’t have to worry about future tuition increases…
With college savings plans, students of all ages can save for all college costs, including tuition, fees, room, board, textbooks, and computers.
Not Just for Children. If you are considering going back to college or graduate school, you can open a college savings plan for yourself. You will save on taxes and if you end up not going to school, you can always transfer the money, tax-free, to another 529 plan for your children or spouse.”
The article has some great examples that show how the various types of programs could help you save.
USA today is currently running an article on these plans:
“These state-sponsored plans allow parents, grandparents and others to invest for a child’s college education. As long as the money is used for higher education expenses, the investment earnings are tax-free. More than 100 savings plans are available, and you can invest in any state’s 529 plan. But in many cases, residents who invest in a 529 plan sponsored by their own state can deduct all or some of their contributions from their state taxes. That creates a quandary for families who prefer another state’s 529 plan to their own”