{"id":45,"date":"2016-08-10T01:26:00","date_gmt":"2016-08-10T01:26:00","guid":{"rendered":"https:\/\/www.truenorthwealth.com\/understanding-529-college-savings-plans\/"},"modified":"2021-12-14T22:06:06","modified_gmt":"2021-12-14T22:06:06","slug":"understanding-529-college-savings-plans","status":"publish","type":"post","link":"https:\/\/www.truenorthwealth.com\/understanding-529-college-savings-plans\/","title":{"rendered":"Understanding 529 College Savings Plans"},"content":{"rendered":"

College tuition costs continue to rise. In fact, according to CollegeBoard<\/a>, college tuition has risen nearly 54% in the last decade when accounting for inflation dollars. That\u2019s staggeringly high. The same website estimates the average cost of private college in the United States at $32,000 per year. State colleges fair a little better at an average cost of $9,410. per year. Considering four years of tuition costs, the price for a college education is a very expensive one. With no signs of costs lowering any time soon, it\u2019s important to start preparing as soon as possible for your children\u2019s future education.<\/p>\n

Today, we\u2019re taking an in-depth look into 529 college savings plans to see if owning one may be intelligent for you.<\/p>\n

What is a 529 college savings plan?<\/h2>\n

Let\u2019s start at the beginning, what exactly is a 529 college savings plan? A 529 plan is a savings plan created as a tool to help families cover the high price of future college costs. The plan is a tax-advantaged savings plan authorized by the Internal Revenue Service and the U.S. Government. These specific savings plans are sponsored by states, state agencies, and\/or educational institutions, like colleges and universities. There are two types of 529 plans: 1. Prepaid tuition plans or 2. General college savings plans. The difference between the two is important to note. All 50 states sponsor at least one type of 529 plan.<\/p>\n

Prepaid Tuition Plans<\/strong><\/h2>\n

Prepaid tuition plans essentially \u2018lock-in\u2019 the current price of college tuition in the market. For example, taking the average costs of state university from above of $9,410 per year, this price would be \u2018locked in\u2019 and not subject to the high inflation rates by the time your child reaches college age. This can potentially save thousands of dollars. However, these plans are only eligible for participating public and private universities and many times require the beneficiary to live in the same state as the institution. Often these plans are limited to covering tuition and books, other related expenses may not be eligible.<\/p>\n

College Savings Plans<\/strong><\/h2>\n

College savings plans are a more general and flexible plan. It works much more like a traditional savings plan. Essentially, it covers all college-related expenses, including tuition, books, room and board, fees, living costs, etc. The plan can be used at any university in the U.S., making it a more flexible option for kids who may end up going to college out of state or attending a different university than anticipated. This plan is not guaranteed by the state, and is instead regulated by the general market ups and downs.<\/p>\n

Check out the chart below from the SEC<\/a>\u00a0to see a side-by-side comparison of the the two plans. Figuring out which plan 529 plan works for you.<\/p>\n

Prepaid Tuition Plan<\/strong>College Savings Plan<\/strong><\/h2>\n

Locks in tuition prices at eligible public and private colleges and universities.No lock on college costs.<\/p>\n

All plans cover tuition and mandatory fees only. Some plans allow you to purchase a room & board option or use excess tuition credits for other qualified expenses.Covers all \u201cqualified higher education expenses,\u201d including:<\/p>\n