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Meeting the financial needs that college brings is one of the biggest hurdles for many families. However, with the right resources and knowledge, paying for college doesn't have to be complicated. There are opportunities for financial aid and tax deductions that can make college more affordable.
Unfortunately, you cannot count on getting financial aid because only a few opportunities are available, and many people have to compete for them. But, if you have some money stashed away in a college savings plan, you have a safer landing to cater for your tuition and personal utilities. If you can save a considerable amount, you would not need to get a student loan or a job.
One of the most valuable tools you can use to finance your college education is a 529 savings plan, and Garlesky Insurance Agency can guide you through the process of starting your college savings plans.
A 529 plan is an education savings plan with tax advantages or, simply, an investment account that has some tax benefits attached. Having tax advantages means that the savings plan is exempt from taxation, deferred taxes, or some other form of tax benefit. Typically, the money saved through this program is to pay for college, apprenticeship programs, K-12 tuition, or to pay your student loans. The 529 savings plan is legally called "qualified tuition plans" and is sponsored by the education institutions, the state, or the state's agencies, according to the Internal Revenue Code, Section 529.
You can choose one of the two 529 plans: an education savings plan or a prepaid tuition plan. All states have at least one of these types, and a selection of private universities and colleges also have some prepaid tuition plan offers. Any US resident can open a 529 plan account provided they are 18 years and older, have a legal and mailing address, and a tax ID or social security number.
The advantages of having the college 529 plan are that it enables you to save for your education and gives you the flexibility to use the money for various educational expenses, including K-12 tuition, college expenses, student loan repayments, and apprenticeship costs. Another perk is that with the 529 plan, you have complete control of your money, unlike with a custodial account.
The 529 plan offers unmatched income tax breaks since the contributions are nondeductible, and their earnings are tax-free. You may also benefit from tax breaks from your state in addition to the federal tax reliefs. Lastly, the 529 savings plan is low maintenance and takes a hands-off approach.
Yes. Your 529 savings may impact your eligibility for financial aid, but the impact would be very minimal. Also, it depends on who the holder of the account is.
If you or your parent is the account holder, your 529 savings plan assets are considered in the Free Application for Federal Student Aid (FAFSA). But, the first $10,000 of the parental assets is under the asset protection allowance and is not considered when calculating the Expected Family Contribution. After this allowance, only 5.64% maximum of the parental assets is considered, which is low compared to other students' savings assets that count up to 20%.
A 529 plan held by a grandparent or other person besides the dependent and parent does not affect the FAFSA. Withdrawals made from the account are treated as student income, but since FAFSA assesses student income at 50%, any withdrawals reduce the students' eligibility by half the amount withdrawn.
Yes. You are required to be a US resident, but there are no stipulations on residency. So, although it would be of little use, you can open as many college savings accounts in as many states as you like.
Paying for college is a significant financial endeavor that could lead you into considerable debt or burden, leaving you with lots of work if you have to take a job while studying. Fortunately, you don't have to navigate this difficult process alone. Work with a professional that can review your options with you. To learn more about creating a college savings plan, contact our office on 330-929-5055, and we will guide you through the process.