Category: student loans
Growing up, lots of kids are left thinking that, tucked away in a bank somewhere, safely nestled away, there exists a substantial college fund just waiting for the day they graduate high school and get accepted to college. This belief comes from a history of movies, books, and television shows which tell us that parents start college funds for their children some time after the first sonogram – but this simply is not true. It is through no fault of the parents and sometimes, of course, parents do have college funds tucked away for their children. Those who do not are by no means bad parents – it is difficult to save money for anything these days, when everything – especially college expenses – is so much more expensive than it used to be. Fortunately, there is now a college savings plan called the 529 Plan, which is designed to help parents – or anyone else – save money for the future college experience.
The 529 Plan is a tax-advantaged investment. It was created to encourage parents, grandparents, legal guardians, et cetera, to begin saving money for the future college educations of their children, grandchildren, are legal wards. It receives its name from Section 529 in the Internal Revenue Code, and it is offered by state agencies and state organizations.
Not all states offer the 529 Plan just yet, but those which do individually decide how the plan is designed and what kinds of investment options they will offer. Most plans allow investors to come from out of state. The advantages for in-state residents who apply for the 529 college savings plan within their state can include tax deductions, matching grant and scholarship opportunities, protection from creditors, and even exemption from financial aid debt.
The 529 Plan is offered in two different forms. There is a prepaid plan, sometimes also called a guaranteed savings plan, which allows for the purchase of tuition ahead of time, based on the current calculations of what the tuition of a specific university is. It is then paid out when the beneficiary of the policy attends a college or university.
There are also savings plans, which are based around the market performance of underlying investment. These are generally comprised of mutual funds. An astounding forty-eight states, plus the District of Columbia, offer the 529 savings plan. Usually, savings plans become more conservative, the older the beneficiary gets. There are also options for risk-based investments, which allows underlying investments to remain in the same fund, no matter what the age of the ultimate recipient.
The 529 college savings plans are a great way for parents, grandparents, or legal guardians to ensure that their young loved ones will be able to afford to go to the very best colleges and receive the very best degrees. It allows children the opportunity to follow their dreams, like before they are actually capable of reaching them. They are ideal plans for adults who want to provide college funds for their children but are unsure or unable to go about it in the way the movies have always told them they should. The 529 plans are realistic and affordable investments, designed to ensure a child’s future successes.