Potential Declines in College Enrollment Due to FAFSA Problems

As college tuition costs continue to rise, parents are increasingly looking for ways to save for their children’s future education. One powerful tool that can help families cover these expenses is a 529 college savings plan. Wealth Enhancement Group breaks down everything you need to know about these plans, from their tax benefits to their contribution and withdrawal limits.

A 529 college savings plan is a tax-advantaged investment account designed to help families save for future education costs. These plans can be used to cover a range of qualified expenses at eligible colleges and universities across the United States and internationally. There are two main types of 529 plans: prepaid tuition plans and education savings plans.

Prepaid tuition plans allow you to prepay a portion of future tuition costs at today’s rates, while education savings plans work more like a Roth IRA, allowing you to invest after-tax dollars into a range of investments. One of the most attractive features of 529 plans is their tax benefits, with earnings growing tax-free and withdrawals for qualified education expenses being tax-free as well.

While 529 plans can impact financial aid eligibility, the effect is relatively minor compared to other assets. It’s important to understand the fees and expenses associated with these plans, as well as what happens to any money left over in the account. Overall, 529 plans offer substantial tax advantages, flexibility in using the funds, and high contribution limits, making them a valuable tool for saving for education expenses.