GI Bill & 529 Plans Cover College Costs
By Tim Gorrell, Executive Director, Ohio Tuition Trust Authority
There are over 20 million Veterans in the United States today and nearly two million men and women actively serving in our active duty, National Guard and reserve armed forces. Upon entering their respective branch of service, each took an oath to “support and defend the Constitution of the United States against all enemies foreign and domestic.” Among the freedoms that this oath and this commitment to service protects is the freedom to choose a path of education, training, or
certification that ensures a rewarding career and economic prosperity. On this Veterans Day, let us take pause and express our gratitude to all those who have served and are serving our great nation, for the many blessings of freedom we enjoy would not be possible without their willingness to answer the call to service.
U.S. Department of Veterans Affairs administers the Post-9/11 GI Bill. This federal assistance includes 36 months of education benefits: full in-state public school tuition and fees (there is a national maximum rate cap for tuition and fees for attending a private college), monthly housing allowance, and an annual books and supplies stipend.
If service members choose not to use these benefits for their own continuing education, they can transfer their unused GI bill benefits to their dependents —spouses and children. The education benefits can be divided among the dependents, helping to pay for their college or vocational training.
A 529 plan can supplement this federal education aid. If the Post-9/11 GI Bill benefits are split among multiple dependents and can’t pay all the costs for each dependent, then a 529 plan can help cover the remaining qualified higher education expenses associated with attending a college or vocational school.
529 plans are a tax-advantaged way to save for college with tax-free earnings and tax-free withdrawals. Some states offer state income tax deductions or credits for 529 contributions. Check out this listing of 529 plan to see which offers a state tax benefit.
If a parent is already saving for college in a 529 plan and their child decides to go to an U.S. military academy, they still have access to the funds. While considered a non-qualified withdrawal, the parent can ask for a 529 plan disbursement up to the estimated cost of attending the military academy without incurring a 10% federal tax penalty. The earnings portion only of the withdrawal will be subject to federal, state, and local taxes.
A 529 plan works well in conjunction with the Post-9/11 GI Bill. To learn more about 529 college savings plans, visit here. For more information about the GI Bill education benefits, please visit here.
About the author: Tim Gorrell is the executive director of Ohio Tuition Trust Authority. Previously, he served as the director of the Ohio Department of Veteran Services. Colonel Gorrell, who retired from the U.S. Army after serving 31 years, is a highly awarded and decorated military leader. For more than 25 years, Ohio Tuition Trust Authority has sponsored and administered CollegeAdvantage, Ohio’s 529 College Savings Program. CollegeAdvantage oversees more than 633,000 accounts and over $10.88 billion in assets. Visit CollegeAdvantage.com or call 1-800-AFFORD-IT (233-6734) for more information.