The amount of debt that can be prevented by saving ahead of time for school costs could be life changing for the parent(s) and the child or children. When the typical college student graduates, they are likely taking on entry level salaries after graduation.
Add the burden of a monthly student loan payment, and you have a recipe for a difficult come up in the world. Career advancement is easier when money isn’t your first problem, like a monthly student loan repayment the size of a luxury car note.
The current student loan debt crisis shows us why it’s important to save for college. Regardless of what’s been done in the past, wouldn’t you rather save money now anyway?
529 savings plans offer an incentive for education savings in that the money is tax-free when a payment is made toward qualifying education expenses like tuition, housing costs and books, to name a few.
These 529 plans are not limited to college education payments. You can also use a 529 plan to pay for qualifying education expenses for children grades K-12.
The money saved in a 529 savings plan can be used for qualifying education expenses, such as tuition, housing and books.
Currently, the maximum withdrawal per year, per beneficiary, from a 529 plan is $10,000. If you do not use all of the money that is saved in a 529 plan, you can change the name of the beneficiary so that they can use the funds, or keep the money in the plan in the case that the current beneficiary decides to go to graduate school. You can make a withdrawal from the 529 plan at any time, for any reason.
If the withdrawal isn’t paid toward qualifying education expenses, a 10% tax on the money may be added. Different rules also apply, depending on your state.