In the U.S. student loan debt outstanding now exceeds that of credit cards and auto loans. To help ensure that your child or grandchild is not burdened with excessive student loan debt, consider opening a 529 college savings plan.
What is a 529 Savings Plan?
A 529 plan is a tax-advantaged savings plan designed to encourage saving for future college costs. 529 plans, legally known as "qualified tuition plans," are sponsored by states, state agencies, or educational institutions and are authorized by Section 529 of the Internal Revenue Code.
There are plenty of misconceptions so let's address a few of them.
- You are not limited to 4-year undergraduate colleges; rather, trade, vocational, graduate schools and community colleges are all possibilities.
- It is not a use it or lose it proposition. You can use the money for your own education or pass it on to another beneficiary. Worst case, if you withdraw the money for non- qualified expenses you would pay income taxes and a 10% penalty on the earnings.
- As the 529 plan is considered your asset and not your child's, it will only have a minor impact if any, on financial aid.
Learn more at savingforcollege.com