Education & College Planning
The following is an article taken from the State of Michigan-run website called www.MiSaves.com. This is the "Michigan Education Savings Program" official site.
While we believe this article represents a good starting point, we none-the-less realize that education planning is a huge maze. We work with, and analyze, all of the Michigan programs and most of the non-Michigan programs so we are in an excellent position to guide you through this maze. Enjoy the article...and give us a call.
College Savings Plans Network Quashes Myths and Encourages Families to Plan Ahead on "529 College Savings Day"
– When it comes to saving for college, many parents and families don’t know where to start—and when they do, they can be quickly overwhelmed with conflicting or misguiding information. On May 29, the College Savings Plans Network (CSPN), a non-profit association that advocates for 529 college savings plans, will sponsor "529 College Savings Day" to combat misinformation in the market and educate families about the importance of saving for college.
FACT: 529 plans have much lower required minimum contribution amounts than many other investments, making them accessible and convenient for families of any income level. Families can usually start a plan with as little as $15 to $25 per month.
2. MYTH: I can just take out loans to pay for college, or my child will get financial aid.
FACT: Approximately 60 percent of federal financial aid comes in the form of student loans, and all loans represent debt that a family must incur. Any savings, even in small increments, that a family can put away will offset the final amount of debt it must take on to pay for college.
3. MYTH: Due to the recession and state budget gaps, investors in prepaid 529 plans have lost all of their investment.
FACT: There are currently 13 states that offer a Prepaid Tuition or Guaranteed Savings Plan that allow for the pre-purchase of tuition based on today's rates to be paid out at the future cost when the beneficiary is in college. While some states needed to rectify budget gaps created by the recent financial crisis, to date, a prepaid tuition plan has never run out of money to pay back investors. CollegeSavings.org
4. MYTH: 529 plans are only for young children.
FACT: There is no maximum age for a 529 plan. Assets may be used at eligible schools offering adult career training or advanced degrees, including part-time programs.
5. MYTH: If I save now, my child won’t be eligible to receive as much financial aid later.
The Deficit Reduction Act of 2005 specifies that funds saved in 529 plans are generally considered to be parental assets, which means that only about six percent of these assets are currently counted towards the family’s expected contribution in federal need-based financial aid calculations.
6. MYTH: A 529 plan can only be used at schools in my home state.
FACT: Assets from 529 plans may be used at any school that is accredited and eligible to accept federal financial aid. This includes nearly all public and private colleges in the United States and many trade and technical schools as well. It even includes some colleges located outside of the US.
7. MYTH: The tax advantages of 529 plans will expire.
FACT: The Pension Protection Act of 2006 repealed the 2010 sunset of the federal tax exemption for Section 529 plans and ensures that money saved for higher education in 529 plans can continue to be used tax-free to help pay for college.
8. MYTH: A 529 plan can only be used for a four-year college.
FACT: Assets from 529 plans may be used at any eligible school, including two- and four-year colleges, graduate schools and vocational and technical schools. Funds may be used for tuition, fees, certain room and board costs, and in 2010, computers and course-related software.
9. MYTH: If my child doesn’t go to college, I will lose my money.
FACT: A 529 account holder can change the plan’s beneficiary to another eligible "member of the family," such as siblings or even oneself with no tax penalty.
10. MYTH: Opening a 529 plan is complicated.
About College Savings Plans Network (CSPN)
College Savings Plans Network (CSPN) is a leading voice for Section 529 College Savings Plans, one of the most popular, convenient and tax-advantaged ways to save for college. CSPN is a not-for-profit association affiliated with the National Association of State Treasurers (NAST) that brings together state administrators of 529 savings and prepaid plans as well as their private sector partners. Information that families of all income levels can use to make informed saving decisions is available on CSPN’s Web site, www.CollegeSavings.org.
FACT: Most 529 plans allow account holders to open an account online, and a wealth of information is available online for families seeking more information about 529 plans. CSPN’s Web site, www.CollgeSavings.org, offers convenient tools and valuable information to help families make wise decisions about saving for college.
LEXINGTON, Ky. (May 24, 2010)
"During the confusion of the financial crisis and the fallout that ensued, many myths were circulated about consumers’ investment options, including 529 plans," said Joan Marshall, Chair of CSPN and Executive Director of the College Savings Plans of Maryland. "The truth is, 529 plans are convenient, tax-advantaged ways that families of all income levels can plan ahead to pay for college. On May 29, we encourage parents, grandparents, family members and friends to learn the facts about this important savings vehicle and make a plan to make their higher education dreams a reality."
* Although the information has been gathered from sources believed to be reliable, it cannot be guaranteed and the accuracy of the information should be independently verified.
*Please note that College Savings Plan Network is not affiliated with Royal Alliance, Inc.
*A 529 plan is a college savings plan that allows individuals to save for college on a tax-advantaged basis. Every state offers at least one 529 plan. Before buying a 529 plan, you should inquire about the particular plan and its fees and expenses. You should also consider that certain states offer tax benefits and fee savings to in-state residents. Whether a state tax deduction and/or application fee savings are available depends on your state of residence. For tax advice, consult your tax professional. Non-qualifying distribution earnings are taxable and subject to a 10% tax penalty
*The hyperlink included is provided as a convenience and is for informational purposes only and is not part of Royal Alliance Associates, Inc. The link to outside web sites does not mean that Royal Alliance Associates, Inc., endorses or accepts any responsibility for the content or use of the web site. Royal Alliance Associates, Inc., does not guarantee the sequence, accuracy or completeness of the data or other information appearing on the linked pages. The company assumes no liability for any inaccuracies, errors or omissions in or from any data or other information provided on the pages, or for any actions taken in reliance on any such data or information.
Top 10 Myths About 529 Plans
1. MYTH: 529 plans are only for wealthy investors.
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