()When it comes to college tuition, what you don’t know can really hurt you.
Yes, 529 plans. Although 529 plans have been around since 1996, which is longer than many Generation Zers, a new Edward Jones survey found that 67% of Americans do not know that they offer a tax-advantaged method to save money on tuition, books, and other education-related expenses at all accredited two- or four-year colleges, universities and vocational-technical school. Worse, the 67 percent figure is five percent higher than in 2012’s survey.
“It’s a concerning trend,”Tim Burke is a principal at Edward Jones, a financial services company.
“Concerning”Because of the current average cost of a four year degree including tuition and room and board at $21,370 per year in public schools according to the College Board and $48,510 per annum at private schools.
How do they think they will handle this freight?
* Personal savings accounts (38 percent).The national average interest rate for such accounts is 0.09 percent. You can cover the $1,200 that the average college student spends each year on books and other materials with this.
* Scholarships (35 percent).Is your child a real football star or a child prodigy? Because Sallie Mae’s “How America Pays for College”A 2018 study found that only 17% of college expenses were paid in this manner.
* Federal or state financial aid (33 percent).Pell Grants, which are the largest source federally funded grants, have a maximum of $6,095 for 2018-19. The amount would cover 28 percent of the average college cost of $21,370 per year. “most students receive smaller grants because they are enrolled part time or because their family income and assets reduce their aid eligibility.”
* Private student loans (20 percent). The Brookings Institution reports that parents who take out loans – not the financially stressed Millennials we hear so much about – spend an average of $16,000 per year, while nearly 10% are responsible for $100,000. “College debt is increasingly becoming a parent problem, too,”ConsumerReports.com is warning.
You can see why Kyle Andersen at Edward Jones, another principal, said that “by relying on scholarships or federal or state financial aid that a student may or may not receive, Americans leave themselves vulnerable.”
We are now back at 529 plans.
Edward Jones and others called this strategy “The 18 percent” of respondents who reported having implemented it.an attractive and practical way to save” How is that possible? Did you remember when we said that they are tax-advantaged. This means that, unlike personal savings accounts, the earnings from these plans – which are typically made up of a portfolio fund – accumulates tax-free and qualified withdrawals are exempted from federal and state income taxes.
Federal gift tax exclusions allow contributors to give up $15,000 per beneficiary per year or $30,000 to married couples. Although almost every state has a 529 plan, with limits that can exceed $500,000 in some cases, there is no federal exclusion. “home-town restriction,”So you may want to consider working with Edward Jones locally financial advisorTo compare plans and to review your situation.
One other thing that less than half of respondents knew was that 529 plans could also be used for tuition at K-12 schools.