| It doesn't take a college degree to realize higher | | | | Advantages offered by 529 plans include: |
| education isn't getting any cheaper. Annual increases | | | | Income tax breaks. 529 plan contributions are not |
| at colleges across the country include double-digit | | | | deductible on a federal tax return; however, the |
| percentage tuition, and families increasingly rely on | | | | investment growth is tax-deferred. This means your |
| college scholarships and financial aid to meet rising | | | | family can save money for college, and make |
| costs. Sadly, many families underestimate the costs | | | | payments toward tuition, without the obligation to |
| involved, or overestimate the amount of college | | | | pay taxes on interest earned by the plan. Also, some |
| scholarship money available. | | | | or all of the distribution may not be taxable, |
| While rising education costs may be out of your | | | | depending on what other college financial aid or |
| control, your ability to plan for a college education is | | | | education scholarships are involved. You may qualify |
| not. You and your family can start saving today, | | | | for local tax breaks too. |
| taking advantage of a state sponsored 529 plan. | | | | The money can only be used for education. The 529 |
| A section 529 plan, also known as a qualified tuition | | | | beneficiary can't make withdrawals independently; the |
| program (QTP), is an education savings plan run by a | | | | money must be used for qualified college expenses. |
| state or educational organization and designed to help | | | | For students, this removes the potential distraction |
| you put money aside for college. | | | | of spending the money on late-night meals. |
| 529 plans fall into two main categories: prepaid college | | | | Contributing to a 529 plan is easy. Select a plan, fill |
| tuition and savings accounts. Every state now offers | | | | out a straightforward enrollment form, invest the |
| a 529 plan. | | | | money through automatic deposits, sit back and |
| Prepaid tuition: Pay for college tuition at today's | | | | relax. The plan takes care of the investment, the |
| prices. For example, if annual tuition at State Tech | | | | assets of which are managed by the state |
| cost $8,000 this year, pay for one year of college | | | | treasurer's office or an outside investment company. |
| now or over time using a 529. When you enroll, | | | | Anyone can do it. There are no eligibility requirements |
| regardless of tuition costs, one year of college will | | | | and large amounts of money can be invested. There |
| already be paid up. | | | | are usually no income limitations and no age |
| Savings account: Place money into an account where | | | | restrictions; family members can start saving |
| it can gain interest and grow. Typically, you won't | | | | whenever they want. Also, anyone returning to |
| pay taxes on the interest gained as long as you use | | | | school can qualify for this type of financial aid, not |
| the money in the account for higher education. | | | | just first time college students. |