While there are different ways which students have begun planning for college and various routes through which federal assistance, private scholarships or grants, or other forms of financial aid may be accessed so that students can meet tuition costs at their chosen university, there are routes that may be used to help plan well in advance for potential educational costs that a student may meet. One of the more popular ways that students can pay their college tuition costs without using loans, which will be problematic for some after graduation, is through a college savings plan like a 529 plan. A 529 college savings plan allows parents to begin putting funds away for their son or daughter’s college expenses, and when properly utilized, these forms of college planning can be greatly beneficial, particularly since college tuition costs have been on the rise.
For men and women who are currently looking for ways to save for college, a 529 plan can be helpful but students who are already attending classes or who may be looking for financial aid sources are obviously not going to benefit from this particular type of savings plan, as this route of college assistance is typically utilized years ahead of a student’s entrance into a college or university. However, simply understanding the basics of a 529 college savings plan may help parents better grasp what benefits can come from preparing for college costs with this particular savings vehicle.
Essentially, there are two types of 529 plans which can be used for future students, one being the savings plan, while a 529 prepaid tuition plan is an option that requires fixed installments and can better help prepare a student for the educational costs they may meet in the future. While a prepaid tuition plan usually will affect the eligibility for financial aid in some cases, a college savings plan may have last impact in this area, but it needs to be understood that some scholarships or grants may factor in these savings when considering a student for an award.
However, when it comes to the popular 529 savings plans, this is essentially an option to invest, similar to an IRA or other retirement account, and does not have any required contributions. This type of college savings account though, can bring more volatility as contributions may go up and down over the years, and there are no set guarantee as to how much this particular type of account will have to offer a student in terms of meeting college costs.
States usually offer these 529 plans and, for those who are interested, there are some drawbacks but essentially they can be a great way to guard against a higher costs that may be in place years down the road for students who could attend a major university or cannot get all of the financial assistance they need. Ideally, parents or investors in a 529 savings plan will be able to save up the majority of college costs that their student will have to meet, but of course this will depend on the amount of time this particular type of savings account is in place.
These 529 plans can be greatly helpful for a variety of college costs too, as tuition, fees, books, or other education related expenses can be covered with the funds saved in these accounts, but if withdrawals are made for reasons outside of those related to meeting college costs, there are usually taxes and penalties involved. Despite the fact that these plans are not perfect, they may be a good way for parents to begin planning for college in the future, and also, 529 savings plans for college have been beneficial in terms of not only helping the students pay for college but allowing them to avoid borrowing student loans and graduating with debt.