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529 College Savings Plans

Paying for Your Child's College Needs


The 529 college savings plan is an investment program that acts as an anchor for the escaping ship that is college. Higher education has become increasingly expensive these days and the lower and middle classes have been left without a life preserver. One good way to help save for college is through investment plans like the 529. However, this is not a great option when their child is nearing college age, but it is a long term investment plan which hopefully the parents will begin when the child is very young. The 529 college saving plan provides a tax deferred financial account for parents who want to help provide access to higher education for their child.

Most 529 college savings plans are state operated. Each state creates their own program and rules. The 529 programs can be run internally or, as many states do, choose an outside program manager. UPromise, TIAA-CREF and Fidelity are a few popular managers that come to mind. The title 529 plan has been popularized because the Qualified Tuition Programs are defined in section 529 of Internal Revenue Code.

If you start saving early in your child's life for their future education, you can take advantage of many tax benefits offered by the 529 college savings plans. While donations to a 529 college savings plan are not deductible on your federal tax return, the investments do grow tax-deferred and when the time comes to take out your money, the disbursements will be tax free as long as they are used for qualified eductional expenses.

Statistics show that currently, the total yearly cost of a college education in a state university in the United States of America is around $18,000. This fee includes tuition, mandatory fees and room and board. In comparison to this, the same education in a private college comes up to $40,000 per annum. For most families without college savings, the bulk of the college education will end up being funded through loans, which will lead to years of payback for both parents and student. A 529 college savings plan can help alleviate the necessity for large loans. But the time to start is when your child is very young so the funds will have time to accumulate using the compounding effect of interest.