As we’ve discussed in a previous blog, many folks around the country call our company, J.G.Wentworth, looking for a way to help pay for the cost of higher education for themselves or for a loved one. Today we would like to discuss an important tool that can help you save for college, the 529 Savings Plan. Named after a specific section of the IRS tax code, 529 Savings Plans are government-sponsored savings programs designed to help people receive tax breaks on their college savings account, and come in two different general types: prepaid and traditional.
Prepaid 529 savings plans
Prepaid plans allow you to buy tuition credits ahead of time at specific educational institutions or within specific states. The benefit with the prepaid 529 savings plan is that you’ll be paying for college at current rates, and will be protected financially regardless of whether those rates increase in the future. While only a minority of states currently offer these plans, they are certainly worth exploring if you or a loved one has their sites set on a specific state or educational institution.
Traditional 529 savings plans
Traditional 529 savings plans also offer participants financial savings associated with the costs of college, though in a far more general way. With traditional 529 savings plans, any money you contribute to your 529 grows tax-deferred, and is allowed to be withdrawn to pay for college without being assessed federal taxes or penalties. If you do not know what specific state or educational institution you plan on attending, or live in a state that does not offer a prepaid 529 savings plans, traditional 529 savings plans are the perfect vehicle through which one can save.
The bottom line: start early, and save as much as you can
The cost of higher education continues to rise, and recent nationwide debt totals estimate that students around the country owe a total of $1.2 trillion in student loan debt. The sooner you start a 529 plan the more time your savings account will have to grow, and . even if a loved one chooses not to attend college, another qualifying family member can use that money for their higher education and receive the 529 savings benefit.
We hope this blog provides a good introduction to the benefits of 529 savings plans, and hope you get your own college savings fund started as soon as possible. And if you still need money to pay for college, cover a sudden medical bill, or pay for any other unforeseen expense, we encourage you to call one of our J.G.Wentworth representatives for a free, no-obligation quote for the sale of your future payments. We can be reached anytime at 877-227-4713.
Nothing above is meant to provide financial, legal or tax advice. You should meet with appropriate professionals for such services.