There’s more than one pathway to career success, but all require training
and education. Paying out of pocket can be a challenge, and loans can saddle
you or your child with substantial debt. 529 plans can help you start saving
today.
Fast facts about 529s
Understanding 529 Plans
A 529 savings plan is a type of investment account that can be used for
education savings. These accounts can be opened by almost anyone, there are
no income limits, and anyone can contribute. A 529 account works much like a
Roth IRA by investing your after-tax contributions into investment
portfolios like a mutual fund.
529s are also very flexible, allowing you to use your savings at in-state,
out-of-state, public, or private schools. This includes community colleges,
trade schools, graduate programs, and some international schools. You can
even use a 529 plan to save for K-12 tuition, registered apprenticeship
programs and certain student loan repayment.
Education savings made simple
529 plans provide a flexible and affordable way to save for the future. The
top reasons to save with a 529 plan include:
Tax benefits help your savings grow faster
Save for education and save on your taxes. Earnings grow free from state
and federal taxes and are never taxed when used for qualified higher
education expenses.
The money you save is always yours
If your plans change, or your student earns a scholarship, you can
withdraw your original investment, although you may be subject to taxes
or penalty on investment earnings.
Minimal impact on financial aid
A 529 account will generally affect federal financial aid, but the
overall impact is usually minimal and will vary based on who owns the
account.
Save for more than just tuition
Use your account for many other qualified higher education expenses like
housing, meal plans, books, computers and much more.
Save early, save often
The sooner you start, the more your savings can grow. Saving $100 a month
could yield nearly $40,000 after 18 years. Waiting just one year to begin
saving could reduce your account by $4,000. Delaying five years could cost
you $16,000!
In most cases, the total value of all 529 accounts owned by the custodial parent(s), including those for different students, must be reported on the FAFSA.
Student Aid Index (SAI) will replace Expected Family Contribution (EFC) for 2024-25. It is an important factor in the needs-analysis calculation on the Free Application for Federal Student Aid (FAFSA), the form used by colleges, states, and other scholarship providers to determine financial aid packages.
Some schools require additional information to determine financial aid awards. Inclusion of accounts owned by someone other than the student or custodial parent depend on the school’s requirements. The best resource for detailed financial aid information is your school’s financial aid office or a college access or financial aid advisor in your area. For more information about federal student aid, visit studentaid.gov.
Like any non-retirement investment or savings, 529 accounts may affect eligibility for need-based financial aid – however, the impact is minimal.
For accounts owned by parents and dependent students, the Free Application for Federal Student Aid (FAFSA) assesses 529 assets at a maximum of 5.64 percent of the value when calculating the Expected Family Contribution (EFC) for financial aid eligibility. Accounts owned by other parties will impact eligibility differently. For more information, consult studentaid.gov or an educational financial aid advisor.
Typically, having a 529 account doesn’t impact merit-based financial aid, like academic or athletic scholarships, and may be used to pay for qualified expenses not covered by a scholarship or retained for future years, for either undergraduate or graduate school.
If your student gets a scholarship, you have options. You can use the money in the 529 account to pay for qualified expenses not covered by a scholarship or retain the funds for future years. Some plans allow you to request a scholarship refund or transfer the account to another student.
Typically, having a 529 plan doesn’t impact merit-based financial aid, like academic or athletic scholarships, and may be used to pay for qualified expenses not covered by a scholarship or retained for future years, for either undergraduate or graduate school. But, like any non-retirement investment or savings account may affect eligibility for need-based financial aid – however the impact is minimal. For accounts owned by parents and dependent students, the Free Application for Federal Student Aid (FAFSA) assesses 529 assets at a maximum of 5.64 percent of the value when calculating the Expected Family Contribution (EFC) for financial aid eligibility. Accounts owned by other parties will impact eligibility differently. For more information, consult Studentaid.gov or an educational financial aid advisor.
Yes. Some states allow a 529 plan to be used to cover tuition costs for private and religious K-12 education, up to $10,000 per child per calendar year.
It’s never too late to open a 529 account. Children or adults of any age can enroll in most 529 savings plans. Although, some restrictions may apply depending on the specific plan.
Yes. Many families choose to enroll in multiple accounts, however, there are maximum contribution limits. For example, the maximum contribution for Virginia529 is $550,000 across all accounts for a single student.
Most 529 plans do not have residency requirements. For example, you do not have to be a Virginia resident to open an Invest529 account (except the Tuition Track Portfolio). Most plans cover expenses for out-of-state schools, but rules may vary by plan.
Generally, anyone can open a 529 account as long as they are 18 years of age or older and a U.S. citizen or legal U.S. resident, while the student must be a U.S. citizen or legal U.S. resident to be named to an account. The account owner may also be a U.S. trust, corporation, partnership, nonprofit organization, custodian, guardian or other entity.
529 plans don’t need to be exclusively used for college! Because of the flexibility, a 529 plan can be used towards any eligible professional or vocational school and even for registered apprenticeship programs. If higher education isn’t in your student’s immediate plans, you can hold the funds in the account for their future use. Alternatively, you can change the student on the account to an eligible family member or even yourself for your own education. The money in the account is always yours. You can withdraw your original investment, although you may be subject to taxes or penalties on investment earnings or non-qualified expenses.
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1This chart is for illustrative purposes only and is not intended
to reflect actual performance of any specific investment. Assumes interest
rate of 6.25 percent compounded monthly. The value of your Virginia529
account will vary depending on market conditions and the performance of the
investment option you select, and it may be more or less than the amount you
deposited. You could lose money – including the principal you invest – or
not make money if you invest in one of these programs. Past performance of
investments is not an indicator of future returns.
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