529 Plans - What are they and how they can help you save/pay for college
NEW YORK (WABC) -- If you have kids or grandkids who are college-bound, wouldn't it be great if there were a place where you could save and invest for that child's college tuition tax-free?
Well, it exists. It's called a 529, named for the section of the federal tax code.
Now, just a few days before National 529 Day, the 29th of May, 7 On Your Side's Nina Pineda tells you why this is a great way to save for college.
There is crippling student debt, no doubt due to skyrocketing tuition costs.
More 7 On Your Side | Grieving mom fights for daughter's death benefits
The College Board says last year, after subtracting grants and student aid, the sticker price of a public college topped $19,000. For a private college, it's nearly $34,000.
"Saving for college is just such a great gift that you can give your children," said Robert Farrington, founder of The College Investor.
Farrington's mission is to teach parents and students how to save for college.
"Google it, '529 Plans in my state,' and you just open an account," he said. "You can start with as little as $25."
Locally, there's NJ Best and NY Saves.
Plans like NY Saves have low fees and offer an array of investments from aggressive to conservative.
"A lot of families get hung up that they have to pay 100% of future costs of college, and honestly, that's not the case," Farrington said. "In fact, most families aren't. Pretty much anything you can save is better than nothing, right?"
It can add up. If you contribute $100 a month to a 529 Plan over 18 years, earning 5% a year, you'll have more than $35,000 to pay for college.
"The great thing about a 529 plan is that the money grows tax-free," Farrington sid. "And it can be withdrawn tax-free when you use it for educational expenses."
The tax-free list includes tuition and fees for college or now vocational schools. It includes books and other supplies like computers, college room and board, and can even be used to pay off student loans.
And it's not just parents who can contribute.
"You can make it a family effort," Farrington said. "So maybe it's grandparents or aunts and uncles. They can all pitch in a little bit."
More 7 On Your Side | DoorDash customer gets more than Italian ice after hit and run
Websites like Backer.com make it simple.
"Your friends and family can go right to that website, they can contribute," Farrington said. "It's all done. You get a notification, you can send a digital thank you note."
As great as 529s are, they may not be for everyone. Remember you must pay yourself first. That means paying for staples like rent, groceries, gas for your car, and even saving for your retirement should come first.
Check into a 529 if you have money left over.
Additional resources:
https://www.savingforcollege.com/calculators/college-savings-calculator
https://www.nerdwallet.com/article/investing/529-plans-by-state
----------
SHARE YOUR STORY
Do you have an issue with a company that you haven't been able to resolve? If so, 7 On Your Side wants to help you!
Fill out the form below or email your questions, issues, or story ideas by filling out the form below or by emailing 7OnYourSideNina@abc.com. All emails MUST INCLUDE YOUR NAME AND CELLPHONE NUMBER. Without a phone number, 7 On Your Side will not be able to respond.
