Savings vs. prepaid tuition
When shopping for a 529 account, you'll need to make a couple of big decisions. The first is whether to go with an education savings plan or a prepaid tuition plan.
Education savings plans allow family members to put money away for a future student's tuition, fees, room and board, textbooks and other qualified higher education expenses.
You grow the money by selecting a portfolio of mutual funds and other investments. The earnings are usually tax-free, but you'll want to see what a plan's disclosures say about fees, because those can reduce your savings by 10% or more.
With prepaid tuition plans, you make payments toward future tuition and fees at participating colleges and universities — at today's prices. The savings can be huge.
But if the kid ultimately decides to go to some other school, you might lose part of your investment. So, some experts suggest using prepaid plans only when children are old enough to know which schools they're likely to attend.
Streamline your debt repayment
Having a single loan to pay off makes it easier to manage your payments, and you can often get a better interest rate than what you might be paying on credit cards and car loans.
Fiona is an online marketplace offering personalized loan options based on your unique financial situation.
When you consolidate your debt with a personal loan through Fiona, you can roll your payments into one monthly installment. Find a lower interest rate and pay down your debt faster with Fiona today.
Find your rate
In-state vs. out-of-state plan
The other big choice is where to open your 529 plan.
All 50 states and the District of Columbia offer 529 college plans. You're allowed to choose an out-of-state plan, though you'll miss out on any special tax breaks that may be available from a 529 plan in your own state.
For example, you might get a deduction off your state income tax for the amounts of money you contribute to the plan. (Of course, that's only if your state has an income tax; some states do not.)
Review the tax benefits in your state to determine whether they’re a strong enough incentive to go with an in-state plan. Other states may have more attractive 529 options with lower costs and more investment choices.
Sponsored
Follow These Steps if you Want to Retire Early
Secure your financial future with a tailored plan to maximize investments, navigate taxes, and retire comfortably.
Zoe Financial is an online platform that can match you with a network of vetted fiduciary advisors who are evaluated based on their credentials, education, experience, and pricing. The best part? - there is no fee to find an advisor.
