On the Internet: College Financing and 529 Savings Plans

Studies have shown that earning power improves with the level of education. Whether you are looking into college for a grandchild, child, friend, or yourself, there are steps that can be taken to lessen the financial burden of higher education. Different savings plans and tax laws exist to help, but the common denominator between them all is always to start saving and start early.

One popular savings vehicle is the 529 plan, a qualified tuition program that is named for the section of the tax code that authorizes them. There are two types of 529 plans: prepaid tuition plans, which allow you to prepay future tuition and fees at today’s costs; and college savings plans, which allow you to contribute to an account set up to pay qualified expenses at any eligible college or university. Each state offers its own versions of these plans, and the rules differ. Contributions to 529 plans are made with aftertax dollars (no tax benefit for contributions), but then grow tax-free at the federal level. Withdrawals from 529 plans to pay for qualified education expenses are free from federal taxes. There may be additional state tax benefits for a 529 plan from your home state. Note that the tax-free withdrawal provision is set to expire in 2011 unless renewed by Congress.

Several Web sites can be quite helpful in answering common questions and obtaining important information on 529 plans. The following sites provide financial calculators, how-to guides, and Q&A sections to aid in your quest to finance higher education.

College Savings Plans Network

www.collegesavings.org
The College Savings Plan Network, an affiliate of the National Association of State Treasurers, maintains a Web site with information on 529 plans. A quick overview explains what a 529 plan is and the tax benefits of such plans.

A PDF version of the brochure “A Guide to Understanding 529 Plans” gives an in-depth overview, explaining what 529 plans are and how they work. It also includes a handy checklist you can use when researching plans to compare their similarities and differences. This brochure is a joint effort between the College Savings Plan Network, the North American Securities Administrators Association and the Investment Company Institute.

A state map links you with the qualified tuition programs for all 50 states. Here you can find out the specific rules for each state’s plans. The FAQs page provides answers to commonly asked questions on 529 plans. The In the News area posts recent news releases and articles on 529 plans from news and government sources. Related links include Web sites devoted to financial aid, college scholarships, and college preparation groups.

Saving for College CLICK ON IMAGE TO SEE FULL SIZE.

Saving for College

www.savingforcollege.com
SavingforCollege.com is a 529 plan information and education site, founded by a 20-year CPA. At the site, you can search for a 529 plan by state or search for a 529 professional in your area.

The site provides various tools that can be of help when comparing plans. One unique feature offers ratings of all 529 savings plans, with separate ratings for the plans as they would apply to state residents and non-residents. A 529 evaluator lets you compare two plans based on features that you select—such as investment options, maximum contributions, and tax benefits. The Investment Results portion of the site provides PDF files containing performance figures and underlying fund data for each plan.

A message board allows you to get answers to your specific questions and read others’ concerns. Also posted to the site are editorials written by the company founder, which can be received by E-mail on a monthly basis.

Registered members gain access to a “getting started” program and enrollment information and materials for 529 plans. The user is allowed up to a maximum of five requested information packets from plan managers. Registration at the site is free.

The site also provides information on the Coverdell Education Savings Accounts and a college resource area with financial aid calculators.

Morningstar CLICK ON IMAGE TO SEE FULL SIZE.

Morningstar

www.morningstar.com
The Personal Finance area of Morningstar provides specifics on each 529 plan, including plan features, total assets, fees and expenses, and maximum contributions. It also shows the investing style of the underlying mutual funds in the plan as well as the Morningstar ratings on the underlying funds.

The College Savings Center offers current editorials written on 529 plans. Areas of discussion include benefits that should be sought in a plan, new investment offerings, how to manage the cost of setting up and managing a plan, as well as general college investing advice. This site also displays articles that pertain to other plans including the Coverdell plan, a tax-free savings account.

Visitors must register at the site to access this information, but registration is free.

529 Solutions

www.529solutions.com
529 Solutions is a full-service investment firm that specializes in investments for 529 plans. You can open an account in selected plans from 10 different states. Accounts can be opened through the Internet, mail, or over the phone.

The site provides basic education about 529 plans along with frequently asked questions. Details on each state’s 529 plans are available.

529 Plans Directory

www.529directory.com
The 529 Plans Directory site provides details on each state’s 529 plans, including eligibility, tax benefits, fees, maximum contributions, and age and time limitations. You can sort the list of plans by state, name, or manager.

The Article 529 area of the site offers articles on 529 plans written by experts in the field.

Financial Aid Officer

www.financialaidofficer.com
This Web site is part of the Student Loan Network and is a guide to federal Stafford, PLUS and alternative student loans. Its purpose is to take users through the loan process, from completing the proper forms to receiving the check.

The site’s Financial Aid 101 area explains how financial aid works and the forms that aid may come in. Topics discussed include how to select a school that will both work with your financial situation as well as make sense as an educational choice. The specifics about different federal and alternative loans are covered, including factors that determine loan size and when interest begins to accrue. A 529 area links you to the 529 Solutions site (see above).

The resource center provides many useful worksheets that can be downloaded and printed. The worksheets can help you determine the costs associated with going to a school and then determine how much of that cost will need to be financed. Other resources on the Web site include a scholarship search, links to FAFSA.com (free application for federal student aid), and information on graduate school loans.