College tuition is increasing every year; however, 529 plans offer a way for grandparents or parents to set up an investment account for their child early on in life. These accounts are designed to help cover and prepare for the large costs accompanying college enrollment and attendance. 529's grow on a tax-advantaged basis and withdrawals are tax free if the distributions are used for qualified expenses. Some categories of purchasable essentials, using a 529, are educational fees, lifestyle supplies or school supplies, and technology. To read further, click on the short article linked below.
Article Link: What Can You Buy With 529 Distributions
Now for a discussion on college tuition financing,
Remember when a college education was reasonably priced? In the past 20 years, the cost of college tuition for public universities has risen 165%. College students and their families have been taking on more and more debt, and they are taking longer to pay it off. Recent data bears this out. In 2021, 34% of adults aged 18 to 29 years have student loan debt, making them more than twice as likely as adults in any other age group to have student debt.1,2
Contributions to Coverdell Education Savings Accounts (ESA) aren’t tax-deductible, but the accounts allow individuals to save for education expenses on a tax-advantaged basis, subject to limitations. Contributions to a Coverdell ESA aren’t tax-deductible, but the account accumulates on a tax-deferred basis. In addition, withdrawals are not taxed as they are used for qualified education expenses. Finally, contributions may be made until the account beneficiary turns 18. However, the money must be withdrawn when the beneficiary turns 30, otherwise taxes and penalties may occur.
There are also other alternative educational paths to consider. For example, would your child be willing to complete their first two years of higher education at a community college, then move on to a preferred college or university later? The tuition is often much less at a state community college, and you could realize additional savings if your child attends school while living at home.
1. Usnews.com, September 17, 2020
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