It’s no secret that college tuition is expensive and has become more expensive over the years. In fact, a recent study shows that within the last ten years, tuition at private, out-of-state, and in-state universities have all increased significantly. Aside from tuition, other costs that will need to be factored into your budget include housing and transportation, food, books, and other fees. One ideal way to start saving for college expenses is to open a 529 Education Savings Plan at First Bank.
What is a 529 Education Savings Plan?
A 529 Education Savings Plan is an investment account that you can use for qualified education expenses. The funds saved in this account have tax benefits and can be applied at any accredited or graduate school in the United States or abroad. For those interested in opening a 529 plan, there are no income requirements, allowing them to be opened regardless of your income level.
Read more on what is a 529 education savings plan?
What are considered qualified expenses?
529 Education Savings Plans cover many qualified expenses, including:
- Tuition and fees
- Books and supplies
- Room and board
- Special needs equipment
- Computers, software, and internet access
There are a wide variety of benefits available when you open a 529 Education Savings Plan. Aside from using the funds for the qualified expenses outlined above, some other advantages include:
- High contribution limits (varies by plan, but most have contribution limits of $300,000 and up)
- Open to residents in all 50 states
- No income level requirements
- Up to $10,000 per year can be used for K-12 education expenses
- Plan contributions grow tax deferred at the federal level
Learn more about the advantages of 529 college savings plans.
What happens to the funds if my child gets a scholarship?
If your child receives a scholarship for college, you still can withdraw funds for non-educational purposes. These funds would not incur the 10% federal penalty; however, you will still owe federal and state income tax on any withdrawals.
If you’re considering different ways to save for college for your child, a 529 Education Savings Plan is an ideal choice. For more information on 529 Education Savings Plans reach out to a knowledgeable First Bank Wealth Management Advisor today.
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