529 college plans

<p>suck , use custodial accounts</p>

<p>Very bad advice if you are hoping for financial aid. Custodial accounts are treated as student assets in the FAFSA EFC formula (bad for financial aid) - 529 accounts are treated as parent assets (good for financial aid). Which now I think of it does not make much sense - 529 accounts are set up specifically to pay for college so it would seem more logical that the be treated as student assets with 20% going to the EFC rather than parent assets with only 5.6% going to the EFC. Hmm - it is late so maybe I am not thinking straight :)</p>

<p>So if someone gave a student a bunch of money for college, it would be better for them to give it to their parents to put in a 529? Or would it be better to just pay the bill immediatly if already enrolled?</p>

<p>I like 529 plans for the reasons stated by Swimcatsmom and because at least in my state you get an % increase based on the annual % rise in state school tuition ~6-7%. Also, you choose a guardian for the account so that if something happens to the parents, the funds still remain for college, just with a new account owner and the same student beneficiary.</p>

<p>What state are you from Mizo, I don't remember reading that on ours in CT.</p>

<p>OH, that is pegged to the guaranteed in state tuition plan which was the first type of 529 plan, prepaid, offered in OH beginning in about 1990, so those of us who started saving back then get a real bonus. However, that part of the plan is no longer taking funds because it would bankrupt the state, but we still get the annual percentage increase on what we have already saved. However, the Gov. Strickland is proposing that state tuition be frozen for the next two years at OH's 13 four year public colleges and the community colleges too.</p>

<p>The newer plan is geared to the stock market and has option to invest with Putnam and Vanguard and the like.</p>

<p>Missouri gives a tax break for 529s..</p>

<p>you can only use the money for college things, id rather be able to use the money for whatever i want who cares if i have to pay a little tax on interest beats the hell outta having to pay 10% of the account in penalties if i need the money for something not school related</p>

<p>so what's a custodial account? like savings in your parent's name?</p>

<p>in a custodial account the money in the acct becomes yours when you turn 18 for whatever use you want</p>

<p>I'm 24......and being screwed by my assets.</p>

<p>you have to put down the amount you have in the 529 on the FAFSA anyways so only advantage is less tax</p>

<p>
[QUOTE]
you have to put down the amount you have in the 529 on the FAFSA anyways so only advantage is less tax

[/quote]
</p>

<p>Yes you have to put the 529 on FAFSA - but as a parent asset which means 5.6% of it goes to your EFC.</p>

<p>Custodial accounts have to be put down as student assets so 20% goes to your EFC. </p>

<p>So from a financial aid point of veiw there is a definite advantage to a 529 over a custodial account.</p>

<p>
[quote]
in a custodial account the money in the acct becomes yours when you turn 18 for whatever use you want

[/quote]

A very good reason to have the money in a 529 account. We are not well off but have made some sacrifices to save money for my kids to help pay for college - not so they can use it for whatever they want. If it is not needed for college (which it is in our case) then they don't get it (nor, I am happy to say, do they expect to).</p>

<p>If this budget change is approved I bet financial planners will advise people to move their UGMA's into 529's --see below:
Bush proposal would make 529 plans more attractive </p>

<p>President Bush’s proposed 2008 budget contains a change that would make 529 plans more attractive as a way to save for college and as an estate planning tool.
Under the proposal, assets in a 529 account would not count at all in determining federal financial aid. They would be ignored entirely when the federal government calculates a family’s expected financial contribution.
Currently, such accounts are considered, although the government typically factors in only about 5 percent to 6 percent of the assets.
This is good news for parents saving for college, but it also reinforces the fact
that 529 plans can be a good estate planning tool for parents and grandparents. Family members can contribute up to $11,000 a year to such plans tax-free, and any increase in value of the assets while in the plan is not taxed. In addition, family members can “front load” their contributions – giving up to $55,000 right away and averaging it out to $11,000 over the next five years for tax purposes.
Family members can also retain some control over the investments, and even change the beneficiary – so that if a child doesn’t need the money for college, it can be left in the account to grow tax-free until it is used for a grandchild.</p>

<p>This month's MONEY magazine has a chart about 529 plans in every state and which ones give a state tax break, etc. It's a helpful article.</p>

<p>529 is 10% on <em>earnings</em> so withdrawing isnt so much of a problem weee</p>