With college expenses on the rise the mere thought of helping your children or loved ones pay for their education may be daunting. According to a recent study by CollegeBoard, average in-state tuition, fees, and room / board charges have reached $20,090 for the 2016 – 2017 school year. That’s the average, and again, is for public in state schools. The average for out-of-state public four year institutions was $35,370 according to CollegeBoard. Considering increases in college expenses which have outpaced core inflation by approximately 3.5% over the last 10 years according to CollegeBoard and one can imagine the cost you may incur in the future.
You may be asking yourself how one begins to save for such expenses. Fortunately there are options available if you’re in a position to begin saving. For this particular article we will discuss the section 529 savings plans available in the state of Virginia which can be used for many qualified higher education expenses at eligible four year colleges, two year colleges, graduate schools, trade schools, and some training programs.
Please note, you are able to purchase 529 plans outside of your resident state. However, such a decision may impact tax benefits if your state offers such benefit for 529 contributions. Virginia currently allows Virginia taxpayers to deduct up to $4,000 per account worth of 529 contributions from their state income taxes per year.
Virginia has three 529 savings plans available; the prepaid529, inVest 529, and College America.
- Allows you to prepay semesters of college tuition for Virginia public institutions at current set rates based upon the beneficiary’s age which can then be used for future tuition and mandatory expenses. Please note, the Prepaid529 does not cover certain expenses such as room and board and the number of credits covered by your Prepaid529 may vary if you select to go to a private institution or out-of-state school.
- Allows you to save money into a savings account or investment portfolio with earnings growing tax free and distributions being tax free provided the funds are used for qualified higher education expenses. You are able to select from age based portfolios which will evolve from more aggressive to more conservative as the beneficiary gets closer to college age or static portfolios that range from conservative to aggressive but will not automatically adjust over time. Money within the inVest529 can be used in-state or out-of-state for qualified higher education expenses which includes tuition, room and board, textbooks, computers, and required supplies.
- Allows you to save money into a wide range of mutual funds with earnings growing tax free and distributions being tax free provided the funds are used for qualified higher education expenses. CollegeAmerica is provided by American Funds and only available through a financial adviser. Monies within CollegeAmerica can be used in-state or out-of-state for qualified higher education expenses which includes tuition, room and board, textbooks, computers, and required supplies.
Please check back in on our blog next week when we will dive deeper into each of these options.