3 Myths Surrounding 529 Plans and Why Opening One is Still a Good Move
Is giving the gift of a 529 college savings plan, such as South Carolina’s Future Scholar, really a good idea?
The short answer is yes. Unfortunately, there are still a few misconceptions that may be holding some back from opening an account or making a contribution.
That’s why we decided to take a closer look at three myths surrounding 529 plans and what the true benefits are for giving the gift of education.
Myth 1 – “If I open a 529 plan, it will reduce my child’s chances of getting financial aid.”
The truth is opening a 529 plan doesn’t mean your child’s chances of getting financial aid are automatically impacted.
In fact, according to Consumer Reports, the impact of saving in a parent-owned 529 plan generally has a minimal impact on your child's ability to qualify for financial aid.
In addition, a 529 plan is treated as the parent’s, or account owner’s asset, not the child’s, in determining eligibility for federal financial aid. Only 5.64% or less of the account’s value (based on the current financial aid formula) is factored in when determining a family’s expected contribution each academic year.
Myth 2 – “Only parents get a tax deduction. There’s nothing in it for me.”
Not true! Anyone can open an account or make a contribution to a pre-existing account and receive a tax deduction. The same tax benefit is available to any contributor.
What’s more, it’s not too late to make a contribution and still receive a tax deduction on your 2018 taxes!
Myth 3 – “A contribution to a 529 plan as a gift doesn’t have that ‘wow factor’ and probably won’t make much of an impact.”
Sure, it may not light up their faces as much as a stuffed bear or the latest video game, but giving a child or loved one the gift of education can help create a lifetime of opportunities for someone you care about.
Just consider this: South Carolinians now shoulder some of the country’s highest student loan debt, a median of $18,366. With your help, a child can head off that burden in advance.
What’s more, many parents already have a 529 plan. So if you’re looking for something to give – say for a birthday or special occasion – don’t hesitate to ask if you can contribute to the child’s Future Scholar account. Many parents are more than happy to receive a contribution to their child’s college fund, and it’s easy to contribute online!
To learn more about Future Scholar or how to send a contribution, visit www.FutureScholar.com. And if you’re still looking for that warm, fuzzy factor, you can give still give the stuffed bear and the gift of a brighter future.