A Glimpse into the Independent 529 College Plan
Let’s take a glimpse into the independent 529 college plan. This is wonderful program designed to avoid the rampant inflation of college tuition. You actually lock in the current price of today’s tuition that your child can later use at any member college.
Here’s how the independent 529 college plan can work for your family. Say that you purchase half a year of tuition for your child today. The member colleges carry the risk and you are protected from future tuition increases. The tuition rate that you just paid is absolutely locked in no matter how much the tuition rises. So you invest $10,000 this year for your daughter who will begin college in 15 years from now. As long as she attends a college that’s an independent 529 member, the plan will look up what the college was charging the year you made your deposit. Say that it was $40,000; you have credit for 25% of one year’s tuition no matter what the school is charging in 2022. By prepaying, you’ve just saved $30,000 tax-free. You may be paying in excess of 50% less tuition than someone who is not participating in the independent 529 college plan.
The amount you save is in relationship to the amount you prepay, but even a small purchase can go a long ways towards saving on college. The independent 529 money covers only undergraduate tuition and mandatory fees. Nothing like the room, board, books or supplies like the other 529 plans do. This may or may not be changed by the time your child attends college.
Each member college offers a special tuition discount so you’re not only saving on tomorrow’s rates, but you’re actually getting a better deal than today’s prices. Each college sets their own discount rates. There are over 260 colleges participating in the independent 529 college plan today. Take a look, some of the finest colleges and universities are among the participants.
Now say that your son or daughter is not accepted into any of the participating colleges. You still have options. You could roll your independent 529 plan over into a state sponsored 529 plan. You could change the beneficiary to another child. Or you could get a refund and still take advantage of the tax breaks if you use the monies for other higher education expenses. Withdrawals used for items other than higher education will be taxed. If your child gets a scholarship to the school, the same options will apply.
The new schools that join the plan will honor the certificates from the current owners. And if a college ever terminates the plan, they will continue to honor the certificates that were sold during and before the time they were involved.
There are many positives to the independent 529 college plan programs. You can enroll at anytime and add monies to your account at anytime. You can contribute as little as $25 a month as long as you reach a minimum of $500 in two years. There are no annual fees, entry fees or exit fees. The member colleges pay for the annual management fee so all of your monies go to tuition. And best yet, all of it is federal tax-free. The rise in value between the original purchase and the amount the tuition is redeemed for is tax-free.
If you have high aspirations for a private college for your child, check the list of participating independent 529 plans. This is a great way to save on tuition. Check with your tax professional to take an ever better glimpse into the independent 529 college plan. This is a great way to get a big bargain on a college education for your child.