529 Plans Offer Advantages to Consumers

LEXINGTON, Ky., May 27 /PRNewswire/ -- "What's your plan?" That's the message for this year's "529 College Savings Day" May 29th. The national awareness day is sponsored by members of the College Savings Plans Network (CSPN) who are working to educate families about the importance of saving for college and ways 529 college savings plans can help, especially during these tough economic times.

With college costs continuing to rise and families facing more financial pressures than ever, CSPN is committed to letting people know they need a plan to save for college and that 529 plans offer families a tax-advantaged way to start saving now for college in the future.

"529 plans provide an opportunity for American families to realize the dream of college and beyond for their children. At the same time, we truly understand the challenging financial position families of college-bound children are in," said Jackie Williams, executive director of the Ohio Tuition Trust Authority, and Immediate Past Chair and spokesperson for CSPN, an affiliate of the National Association of State Treasurers (NAST).

Fiscally, the climate is tough for families trying to save for college. In some cases, extra money that might have been used to fund a college savings plan is now needed to cover other household expenses. Families who have invested in the stock market may have also seen their accounts decline over the past year, raising concern about the performance of the market.

"Our goal is to provide parents with reliable 529 savings and prepaid programs as an affordable, and fiscally responsible way to save for college," said Williams. "And on college savings day, as with every day, we want to remind parents of the origin, core mission and differences of 529 plans."

How Are 529 Plans Different?

Unlike other investment options, 529 plans administered by states have a unique set of goals. The plans have been established by states to: 1) increase access to higher education to build a better-educated workforce; and 2) encourage all families to save for college, including low- and moderate-income families that are generally underserved by financial services firms. Without the 529 plans offered in 50 states and Washington D.C., college savings options for American families would be severely limited.

A college education has become increasingly difficult to attain because of the growing college price tag - over the last 30 years, tuition inflation has increased at a rate two to three times higher than inflation. A 529 plan can help overcome that price tag. However, as the general ebb and flow of the market continues to dominate investment news, debunking myths about 529 plans is an ongoing process for CSPN.

529 Plan Benefits Give Families an Edge

529 plans are set up to offer a wide range of benefits to consumers who participate in the plans. Fees are a big concern for most investors. Because many 529 plans are direct-sold, most states offer participants a plan with fees below one percent. Additionally, state oversight of these plans ensures better checks and balances for managing plans properly. Finally, 529 plans are affordable. Most direct-sold plans allow participants to contribute as little as $15 at a time and offer a variety of payment options such as bank account draft or payroll deduction.

Other benefits include tax free growth of earnings, and those earnings are exempt from state and federal income tax when used to pay for qualified higher education expenses. Many states also offer an income tax deduction or credit on contributions to a 529 plan. Consumers are encouraged to check with their individual state plans for these benefits and others, such as matching grant programs.

"529 College Savings Day"

On May 29, CSPN encourages all parents, grandparents and family members of future college-bound children to visit CollegeSavings.org to learn more about saving for college with a 529 plan.

In addition to skyrocketing college costs and the difficulty of saving for college, financial aid may leave future graduating students saddled with insurmountable debt since most aid now comes in the form of student loans. Proper planning by parents early in a child's life can make a significant difference when the college years arrive.

"More Americans are able to afford college because of 529 plans. '529 College Savings Day' is a way for us to reach out to American families to let them know there are 529 plans available to them. Even during these

tough economic times, it is extremely important to save for college, and even small amounts saved may decrease the debt a child incurs for a college education," Williams said.

Williams added, "There is a risk with any type of investment, including investing for college. 529 plans can help consumers manage that risk. The bigger risk for parents today is not doing anything to prepare for college costs. Parents who use the resources available to them to research the plan most suitable to their personal education and financial goals can fare well with the long-term investments offered by 529 plans."

"529 College Savings Day" is a great time for parents to think about their plan. After all, fundamental aspirations for children remain, despite these uncertain times.

College Savings Plans Network (CSPN)

Founded in 1991, the CSPN is an affiliate of the National Association of State Treasurers (NAST). CSPN is a non-profit association representing states that administer Section 529 college savings and prepaid tuition plans. One of the Network's primary purposes is to educate families about the importance of saving for college and the benefits of Section 529 plans. Additionally, CSPN monitors federal activities and promotes legislative and regulatory changes to enhance Section 529 plans.

To learn more about CSPN and 529 plans across the country, visit CollegeSavings.org.