By: South Carolina State Treasurer Curtis Loftis, Administrator of Future Scholar College Savings Plan
May 15, 2018
Between warm weather and graduation season, the month of May has always been one I look forward to. With May comes a favorite celebration of mine – May 29th, also known as National 529 Day. While each state has their own unique traditions and events to honor this special day, the underlying mission is the same – to raise awareness of the importance of 529 college savings plans.
As I’m sure many are aware, 529 plans are a wonderful way to ensure your loved ones are financially prepared for the costs of higher education. However, there are many common misconceptions related to 529 plans that can be cleared up with a little myth busting. These include:
Myth: If my child decides not to attend college, I will lose all the funds I have contributed to their 529 plan.
Fact: You won’t lose all of your savings– in fact, you have many options should your child choose not to attend a college or university. From changing the beneficiary to a qualifying member of your family who will attend college, to putting the money towards continuing your own education, your 529 funds will never go to waste. You can also request a refund; however, this would be considered a non-qualified withdrawal which may be subject to federal and state taxes as well as a federal penalty.
Myth: I can only invest in my home state’s plan.
Fact: You can elect to save using almost any state’s 529 college savings plan, no matter where you live. While I always advise families to check out their own state’s plan first to see if it aligns with their needs, information for exploring all the different state plans can be found here.
Myth: My child is likely to receive an athletic or financial scholarship; therefore, a 529 plan will not be needed.
Fact: Funds from 529 plans can be applied towards various qualified higher education expenses, such as room and board and textbooks – fees that can quickly add up and aren’t often covered by scholarships.
Myth: My income is too high to contribute to a 529 plan.
Fact: Anyone can open a 529 savings plan and make regular contributions, regardless of income level.
When it comes down to it, the numerous perks to having a 529 college savings plan are clear. Between the tax benefits, to no minimum contribution limits, to growth potential, 529 plans truly are the best resource to help you achieve your college savings goals. So, for those of you who do not already have one, or who may have already opened a 529 plan for your loved one but have not been making contributions, what is stopping you? While your loved ones’ future may seem far off, by having a financial plan, you’ll be better equipped to help them achieve their educational hopes and dreams.
Visit CSPN for answers to any questions you have about saving for college with a 529 plan.
About the author: Curtis Loftis is the State Treasurer of South Carolina. He also serves as the administrator of South Carolina’s Future Scholar 529 college savings program. Visit treasurer.sc.gov or futurescholar.com for more information on ways to save through a 529 plan.