The Gift of Higher Education

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Student debt is at an all-time high and continues to show no signs of slowing down.  What if there was a way to set aside money each month and have it grow tax free and compound over time in the stock market? 

As a father, one of my financials goals is to have our daughter go to college and graduate without any debt.  Let’s explore how a 529 College Savings Plan can help accomplish this goal!

A 529 College Savings is designed to help you make saving for college a priority while offering tax benefits. 

A closer look at the facts:

Savings in a 529 plan are considered when determining financial aid eligibility – TRUE

Funds saved in a 529 plan owned by a parent or student are considered parental assets. When determining a student’s expected family contribution, a financial aid office will count up to 5.64% of parental assets as funds available to pay for college (compared to 20% of student assets).

529 plan savings must be applied toward colleges in the state where the plan is based – FALSE

You can use your 529 savings to pay for almost any post-secondary education, including traditional four-year universities, community colleges, trade schools and even study abroad programs.

If my child doesn’t go to college, I’ll lose the money I have saved in my 529 plan – FALSE

Funds can be transferred to another family member if the first beneficiary doesn’t attend college or doesn’t use all the assets.  Although 529 rules still apply to the transfer, this allows for greater flexibility.  

If my child gets a scholarship, I’ll lose the money I have saved in a 529 plan – FALSE

If a student gets a scholarship, non-qualified 529 plan withdrawals up to the amount of the tax-free scholarship will not be subject to the 10% penalty. The earnings portion of the withdrawal, however, will incur income taxes.

 

Similarly to saving for retirement, time is on your side when you start early. Let your money work for you by opening a 529 plan today, and let the power of time and compounding do the rest to help you reach your college savings goals.

 

Daniel H. Zeigler, CFP®, CMFC®, is an Assistant Vice President, Wealth Advisor & Investment Officer with the Alpine Trust & Investment Group. 

 

 

 

Investment and insurance products are: not FDIC insured; not guaranteed; and, may be subject to investment risk, including possible loss of principal.

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