Question: What is the Private College 529 Plan, and who should invest in one? What happens to the money if you don't go to one of the colleges? -N.H., Bethesda, Md.
Answer: The Private College 529 Plan is a prepaid tuition plan you can use at more than 290 private colleges, including Duke, Emory, Notre Dame, Princeton and Rice. The money you invest prepays future tuition at today's prices. So if you invested $10,000 in the plan 10 years ago, it would have bought about one-fourth of a year's tuition at Notre Dame--now worth nearly $14,500, says Bob Cole, of the Private College 529 Plan. The gains are tax-free, and the prepaid tuition can be redeemed for up to 30 years. Arizona, Kansas, Minnesota, Missouri, Montana and Pennsylvania let residents deduct plan contributions on state tax returns.
If your child doesn't go to a school on the list, you can use the money to pay other colleges directly without owing taxes or penalties—but the value is limited to your contribution plus net investment returns of no more than 2% per year. You can also switch the account to another beneficiary within the family.
Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
-
Here's How To Get Organized And Work For YourselfWhether you’re looking for a side gig or planning to start your own business, it has never been easier to strike out on your own. Here is our guide to navigating working for yourself.
-
How to Manage Risk With Diversification"Don't put all your eggs in one basket" means different things to different investors. Here's how to manage your risk with portfolio diversification.
-
529 Plans: A Powerful Way to Tackle Rising Education CostsContributions to 529 plans grow tax-free and are not taxed when they are used to pay for qualified educational expenses for the beneficiary.
-
Are Student Loans Being Forgiven or Not?Student Loans The House and Senate voted to repeal President Biden’s student loan forgiveness plan, but does it even matter?
-
Are Scholarships Tax-Free?Education Scholarships are generally tax-free if certain IRS and other requirements are met.
-
Student Loan Forgiveness Blocked For Now Due to Court RulingsBiden's student loan debt forgiveness program is on hold until the U.S. Supreme Court weighs in.
-
529 Plan Contribution Deadlines529 Plans Many states have year-end deadlines for making 529 college savings plan contributions.
-
3 Key Ways You Can Help a Child or Grandchild Pay for Collegecollege Options such as 529 plans, education savings accounts and tax-free gifts can ensure you don’t carry a child’s student loan debt into your golden years.
-
Borrowers Over 50 With Student Loan DebtPaying for College Millions of borrowers 50 and older are struggling to repay loans for themselves and their children, some delaying retirement. There’s a trick, though, to help with repayment.
-
How to Spend $1,000: Find Cheap (or Free) Online Courses to Build Career SkillsSmart Buying There's a huge array of skill-building online courses that can level up your career for under $1,000.
