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A Glimpse into the Independent 529 College Plan
Let’s take a glimpse into the independent 529-college plan. This is wonderful program designed to avoid the rampant
inflation of college tuition. You actually lock in the current price of today’s tuition that your child can later
use at any member college.
Here’s how the independent 529-college plan can work for your family. Say that you purchase half a year of tuition
for your child today. The member colleges carry the risk and you are protected from future tuition increases. The
tuition rate that you just paid is absolutely locked in no matter how much the tuition rises. So you invest $10,000
this year for your daughter who will begin college in 15 years from now.
As long as she attends a college that’s an independent 529 member, the plan will look up what
the college was charging the year you made your deposit. Say that it was $40,000; you have credit for 25% of
one year’s tuition no matter what the school is charging in 2022. By prepaying, you’ve just saved $30,000
tax-free. You may be paying in excess of 50% less tuition than someone who is not participating in the
independent 529-college plan.
The amount you save is in relationship to the amount you prepay, but even a small purchase can go a long ways
towards saving on college. The independent 529 money covers only undergraduate tuition and mandatory fees. Nothing
like the room, board, books or supplies like the other 529 plans do. This may or may not be changed by the time
your child attends college.
Each member college offers a special tuition discount so you’re not only saving on tomorrow’s rates, but you’re
actually getting a better deal than today’s prices. Each college sets their own discount rates. There are over 260
colleges participating in the independent 529 plan today. Take a look, some of the finest colleges and universities
are among the participants.
Now say that your son or daughter is not accepted into any of the participating colleges. You still have options.
You could roll your independent 529 plan over into a state sponsored 529 plan. You could change the beneficiary to
another child. Or you could get a refund and still take advantage of the tax breaks if you use the monies for other
higher education expenses. Withdrawals used for items other than higher education will be taxed. If your child gets
a scholarship to the school, the same options will apply.
The new schools that join the plan will honor the certificates from the current owners. And if a college ever
terminates the plan, they will continue to honor the certificates that were sold during and before the time they
were involved.
There are many positives to the independent 529 programs. You can enroll at anytime and add monies to your account
at anytime. You can contribute as little as $25 a month as long as you reach a minimum of $500 in two years. There
are no annual fees, entry fees or exit fees. The member colleges pay for the annual management fee so all of your
monies go to tuition. And best yet, all of it is federal tax-free. The rise in value between the original purchase
and the amount of tuition the corticated is redeemed for is tax-free.
If you have high aspirations for a private college for your child, check the list of participating independent 529
plans. This is a great way to save on tuition. Check with your tax professional to take an ever better glimpse into
the independent 529-college plan. This is a great way to get a big bargain on a college education for your
child.
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