With a little research, knowledge, and creativity, you have a number of excellent ways to lower the cost of attending college. Some of this involves creating a working budget, followed by making wise financial decisions. However, you can also save on the cost of college by using a variety of available programs such as the 529 Plan. Many students have never heard of this specific plan so we felt it important to offer information as to its concept and benefits.
For starters, the 529 Plan is a special savings options specifically designed for college students. Interestingly, this plan is not new. In fact, it was created back in 1996 to help families put money aside to send a child to college at a future time. The name itself comes from the code it is associated with based on the Internal Revenue Service. While there are a number of benefits associated with the 529 Plan, one that stands out is that it is accepted for qualifying colleges and universities throughout the country. In other words, your child could benefit from this plan whether going to college in his or her state or out of state.
Of course, because the 529 Plan is for qualifying colleges and universities, it would be imperative to conduct research to determine which schools your child could consider for earning a college education. Keep in mind, all states offer at least one such plan although each state also has the right and power to determine if the plan would be offered. Again, while the 529 Plan is nationwide, it being offered, as well as the amount of savings offered would vary from one state to another so some research is necessary.
Now, regarding tax benefits associated with the 529 Plan, you will find that some basic requirements exist. As an example, the Federal Government offers special tax benefits if you and your child were to participate in the plan. In addition, a large number of states have some type of tax incentive for investors but this is not something that all states offer. For this, you want to look into the tax treatment for the state in which your child wants to attend college.
You will also find that several different versions of the 529 Plan are available. However, most are listed as a savings plan or prepaid plan. The following includes more specific information on these different forms of the 529 Plan.
• Savings Plan – In this case, the 529 Plan would be established to work similar to an IRA or 401K whereby your contributions would be invested in some type of mutual fund or other investment opportunity. With this, you would have the option of choosing from several investment possibilities. Of course, the value of the 529 Plan would increase and decrease according to market fluctuations.
• Prepaid Plan – The other most common type of 529 Plan is for prepayments involving some or all of the cost for your child to attend an in-state college or university. Often, prepayment costs can also be used for out-of-state, as well as private colleges and universities. However, if your child were interested in earning a degree from a private educational institution, then the 529 Plan would need to be independently managed.
If you want to get started with enrollment into a 529 Plan you could write the manager directly or use the services of a financial advisor. Regardless of the path chosen, getting ahead of the game by using a 529 Plan is highly beneficial. With this, you would be able to see your child go to college and earn the desired degree. Yes, money in today’s economy is tight but this is the very reason that something such as a 529 Plan is so highly beneficial. Instead of explaining to your child that college is simply not an option at this time, you would have the chance to show your child various colleges and universities to attend.