Celebrating National College Savings Month – What are 529 Plans and What Can it Do for You?

September 15, 2023

September may be back-to-school time for many families, but did you know it’s also National College Savings Month? For National College Savings Month, consider analyzing where you are on your college savings journey and what you can do to maximize your efforts and grow your savings even more with programs like a 529 higher education savings plan.

Contributing to a 529 plan might be the key to helping prepare your child for whatever path they choose. As inflation rises, college tuition and fees surge, and student loan debt continues to hamper millions of Americans, college affordability remains a major concern. For example, a recent college confidence survey by College Pulse found that only 36% of parents are confident they can pay for their child’s college education.

What can consumers do to curb the rising costs of education? Consider opening a 529 plan for a loved one. A 529 plan is an investment account that offers numerous tax benefits and can be used to pay for qualified education expenses. 529 plans are commonly offered through a consumer’s state or employer and can easily be opened with the help of a financial advisor.

Here's why 529s are one of the more flexible and attractive ways to achieve your education savings goals:

  • Tax advantages: Earnings in a 529 plan grow federal tax free and are not taxed when you withdraw the money to pay for certain college and other qualified education expenses.
  • Qualified education expenses: 529s can be used for four-year or community colleges, career and technical schools, and registered apprenticeships. In addition to tuition and fees, they can cover those expenses that add up, such as room and board, fees, books, and computers. And they can be used for qualified institutions abroad. Also, if your child does incur debt, 529 account funds can be used to pay up to $10,000 in qualified student loans per beneficiary.
  • Gifting benefits: Grandparents, friends and other family members can contribute as little as $10 to a child’s account through online gifting tools, crowdfunding platforms or E-gift cards.
  • User flexibility: 529 savings can also be used by another family member – or even yourself – for retraining or getting a new certification.

Contact us at Northwest Bank to learn more.