Finance: Back to School: 529 College Savings Plan

Back to School

By Lauren Caggiano

Helping your child or family member get on the best path can often mean helping them navigate higher education.

Two means to do that include contributing to a 529 plan and completing a Free Application for Federal Student Aid (FAFSA®) form. Edward Jones Financial Advisor Carrie Lamb is experienced in both areas and wants families to feel empowered as they think about their child or children’s future.

For instance, a savings vehicle like a 529 plan can help provide peace of mind for a child’s future. It is an investment account that offers tax benefits when used to pay for qualified education expenses for a designated beneficiary. You can use a 529 plan to pay for college, K-12 tuition, apprenticeship programs, and student loan repayments. If using a 529 plan to save for college, your savings will have a minimal impact on financial aid eligibility.

“The whole objective of a 529 plan is that you put money in there and you invest in hopes that it’s growing,” Lamb said. “That growth is tax-deferred if you actually use the money for educational expenses.”

Qualified expenses for college include tuition and fees, books and materials, room and board (for students enrolled at least half-time), computers and related equipment, internet access and special needs equipment for students attending a college, and university or other eligible post-secondary educational institutions.

In other words, these costs can add up fast. Having savings can help offset these expenses, especially as higher education continues to get more expensive. When time is on your side, however, you benefit in the form of earnings potential.

“Imagine putting 20 bucks a week in the 529 savings plan,” Lamb said. “The hope is that in 10 years, it would have doubled.” There’s also the advantage that everyone is eligible to take advantage of a 529 plan. For this reason and more, Lamb said people are leaving money on the table if they don’t participate.

“The best advice that I could give someone is that it’s better to start than not start— even if you don’t know if your kid is going to go to college,” she said. “Because it doesn’t have to be used for college. It could be used for a trade school.”

Speaking of college, Lamb also reminds readers that the FAFSA filing deadline is approaching. To be considered for federal student aid for the 2022–23 award year, you can complete a FAFSA® form between Oct. 1, 2021, and 11:59 p.m. Central time (CT) on June 30, 2023.

There’s an incentive to complete the form as soon as possible.

“It’s on a first-come-first-serve (basis),” she said. “So, the sooner you apply, the more consideration you get.”

Speaking of consideration, Lamb is willing to help clients sort out both 529 savings plans and FAFSA® forms. It’s a value add that can help people, especially those who are new to higher education. a

photos:shutterstock.com

Resource: Carrie Lamb, Edward Jones, Fort Wayne, 260.471.0013, edwardjones.com