529 College Savings PlansNovember 30, 2020
The world of college financial aid can be confusing if you do not have a background in finance. While most people are probably familiar with the standard financing options like scholarships, loans, and grants, there are other financial aid options that are not so familiar. Few people know what a 529 college savings plan is, for example.
A Look at 529 College Savings Plans
529 plans are far less understood and utilized than other options. This is unfortunate because 529 college savings plans are a great way to pay for college. There are two basic types of 529 plans. The first type is the standard savings plan. A savings plan is similar to any other savings plan. You put money in it, it earns a percentage in interest, and when you are ready to go to college, you simply withdraw the money and use it to pay for tuition.
The second type of 529 plan is slightly different. This type is called a prepaid plan. A prepaid 529 plan is a contract in which you are making early payments on future tuition. Traditionally, prepaid 529 plans have been used for students who attend a public university in their home state. This is not a requirement, but students who do decide to attend private schools outside their home state may lose some of the value of their contract.
Though these are the two basic types of 529 plans, there are many variations and each state has its own requirements and rules. It is advisable to contact a financial professional or internet financial aid resource to find out the 529 situation and regulations in your state.