Fall has arrived, and football season is upon us. The kids are going “back to school” or off to school for the first time.
As a parent of a 19-month-old and a three-and-a-half-year-old daughter, it seems like we have plenty of time to save for future education goals. However, they grow up fast, and time seems to get away from us if we do not have a plan in place.
There are some amazing statistics about college graduates accumulating a large amount of student debt, a staggering $1.3 trillion and rising, with the current median student loan debt being $16,995. If you want to learn more about this epidemic, take a few minutes to view this film by Adam Carroll “Broke, Busted and Disgusted; College Debt Documentary.”
The goal for our children and grandchildren is to give them the best chance to succeed and to launch their careers with the least amount of student debt possible. Whether our current or future students receive scholarships, and/or have access to College Savings 529 accounts, they will need these resources to be on a strong path of avoiding the anchor of student loan debt.
Here are some items to consider when crafting your successful game plan for education funding that will provide you the highest probability of success:
- Start saving and using funds early
Saving today for future education goals can make all the difference toward success. As of June 2018, in Iowa, your 529 account can be utilized for qualified K-12 tuition and education expenses at public, private, or religious schools up to $10,000 per year. Whether you are planning for expenses now or in the future, planning ahead for how much your student will need is important to understand.
- Student loans
Repayment of student loans is NOT a qualified education expense for a 529 plan. Before a student applies for a student loan(s), plan accordingly knowing that student loans cannot be paid with 529 funds.
If your student receives a scholarship(s) and you find that their account is “overfunded,” you have options. The account owner has the right to transfer a 529 account balance(s) to an eligible family member. Second, a withdrawal can be made in the amount not to exceed the balance of the scholarship(s) received without penalty (10%). However, the pro-rata earnings amount will need to be included back in your income taxes. You will want to consult your tax advisor on any distribution.
Opening an account online is straightforward and can be completed in a matter of minutes. If you have questions about college expense projections and/or how much should/could you be contributing, feel free to contact us.
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