Are you Thinking About Saving for College? Important Aspects You Should Know About College Savings Plans
The prices for a quality college education keep on rising in the United States. However, the incomes are not rising as fast. Only those in the upper strata of social hierarchy can even think of attending college and paying the fees without much fuss. Those from the lower or middle classes need a proper strategy for college savings plans. It is recommended that you start on these plans for your children early. So, when the time comes, your children can get higher education without worrying for money.
What is the True Cost of College?
Before thinking of college savings plans, you must have an idea of costs. The U.S. Govt requires all colleges and universities to publish their annual cost of attendance. This includes tuition, various fees, supplies, transportation and personal expenses. The latest calculations estimate the net cost of colleges in USA are as follows;
- Public Four Year: $21,950
- Private Non-Profit Four Year: $49,870
If you account for grant aid and tax benefits, the totals come down somewhere like this;
- Public Four Year: $15,380
- Private Non-Profit Four Year: $27,370
Key points to Remember for College Savings Plans
- The first step in college savings plans is to determine the costs you are likely to pay in a school of your choice.
- The advertised prices by a school may not be absolute. Accounting for financial insurance plans or tax benefits can cause a fair amount of reduction in initial estimates.
- Student loans do not allow reduction in prices. They only postpone the inevitable toll you must pay. Accounting for interest, they actually increase the costs from advertised amount.
- A state administered 529 is considered one of the best, easiest and convenient among college savings plans by many people.
What are 529 College Savings Plans?
529 is the most famous and widely used among college savings schemes. It has two major types;
- 529 Savings Plans
- 529 Prepaid Tuition Plans
The savings plans grow tax-deferred. Any withdrawals from this plan are tax free if they are used for the qualified educational expenses. Prepaid tuition plans, such as plan 529, allow the plan holder to their tuition’s for designated college or university in advance. This can be used to lock the cost at present rate.
What are the Tax Advantages of 529 College Savings Plans?
The money from 529 plans must be used for qualified educational expenses. This can allow the earnings to be fully or partially exempt from federal and state taxes. Any withdrawals other than the qualified ones are subject to taxes plus a 10% penalty. However, there are exceptions for special circumstances, such as death or disability.
The money contributed to the plan 529 is not federal tax deductible. However, there are more than 30 states that provide tax deductions or credits for this contribution. You might need to invest in your home state’s plan if you want a state tax deduction or credit.
Is it a Good Idea to opt for 529 College Saving’s Plans?
Like any other form of investment, it is better to start off early in 529 plans too. This will allow you money the time to grow and compound. You will also be able to lock the tuition rate. Since most institutes raise their fees every year, it is a good idea to opt for this option.
How to Access College Savings Plans in Dallas, Texas?
Contact us for more information on College Saving’s Plans. We offer our humble but experienced assistance in availing any and all opportunities. Your better future is our better future.
