There’s no doubt that attending college, or sending a child through college, is a major life expense. But a 529 Plan can help ensure that funds are available before that first tuition payment is due and can help college savers reduce their taxable income in the meantime.
A 529 Plan is a savings plan that allows people to prepay for their educational expenses. The plan can be set up for oneself or for a child, grandchild, or other recipient and is exempt from both federal taxes and most state income taxes when used to pay for qualifying education expenses. These plans, named for Section 529 of the Internal Revenue Code, can either be prepaid tuition plans or education savings plans. Prepaid plans allow someone to save for a specific local or state institution and are limited in usability. Education savings plans can be invested in a variety of portfolios such as mutual fund and exchange-traded fund portfolios, and money can be applied to both tuition and related expenses, including room and board and school supplies.
How an Education Savings Plan Works
An education savings plan can provide people with the greatest flexibility with numerous fund options for investing based on risk and age, as well as the opportunity to use funds for a variety of educational purposes and people. Funds can be used at any college or university and can be shifted to another beneficiary if needed. There may be fees associated with managing the plan, but these can potentially be avoided by enrolling in a state plan, keeping the amount saved above a certain threshold, or setting up automatic contributions.
A 529 Plan can be helpful if people are planning to pay for school for themselves or others, can use help to make those savings grow, and could benefit from tax advantages.
Steps to College Savings
A 529 Plan is just one approach to saving for upcoming college costs. It’s also important to research schools that offer financial aid, scholarships, and other incentives to make attending college more affordable. The University of Phoenix is designed to meet the needs of working adults, many of whom have families to support and who are looking to earn a degree that can open new career doors and financial opportunities.
The University of Phoenix understands that affordability is a major factor in college decision-making and helps prospective and current students navigate that financial commitment with a variety of resources. These include a net price calculator, a free resource that calculates the probable cost of education at the university based on information such as income, number of children, living situation, and other measures. The calculator also indicates a prospective student’s financial aid status.
Financial literacy tools are provided as a service to students via the iGrad platform. This resource provides a financial wellness program that can help students plan and manage their spending and saving with tips on investing budgeting and student loans.
Another tool offered to students is the Consumer Information Guide (CIG), developed by the Consumer Financial Protection Bureau (CFPB). This provides a full suite of information about the university’s accreditation and demographics, in addition to details on paying for a University of Phoenix education through federal aid, grants and scholarships, loans, financial aid, military benefits, transfer student aid, and other means.
Keeping Costs Low and Transparent
Transparency around costs is built into the University of Phoenix model. The university’s website provides detailed information about costs for various programs and information about fixed tuition, which will not rise throughout the course of a degree program, despite the fact that education costs have risen an average of 2.6 percent every year in the U.S.
The webpage dedicated to tuition and financial options walks prospective students through a range of payment options, including federal aid and employee assistance programs; work and life experience can also help reduce time and money spent on a degree program at the University of Phoenix via Prior Learning Assessment credits.
In the end, students will likely employ a range of financial strategies to finance their college education. A 529 Plan can be a smart part of that strategy and can work in conjunction with loans, grants, scholarships, and other options.
This article is intended to provide a general understanding of 529/QTP plans and that they should seek guidance from an actual plan sponsor or tax advisor to determine the best course of action for their particular needs.
University of Phoenix
The University of Phoenix is committed to advancing the educational goals of adult and nontraditional learners and to helping students navigate the career options and degree programs that best suit their interests. The university’s degree programs are aligned with numerous in-demand career paths, including in computer software, nursing, and business. The university offers numerous paths to make the educational process more affordable, including fixed tuition costs, credits for work and life experience, and scholarships. In addition, the University’s Career Services for Life® commitment to active students and graduates provides services including resume and interview support, career guidance, education, and networking opportunities. For more information, visit www.phoenix.edu.
