529 Prepaid

529 Savings

Example

CollegeIllinois!

BrightStart, Bright Directions

Overview

Contributions today are guaranteed to cover cost of tuition at covered institutions at a set date in the future.

College investment account for the benefit of any person that you wish to save money for education on behalf of.

Sponsor

States

States (usually with a financial services company)

Limits

Depends upon the plan and the students’ age.

Varies by state— may be as much as $300,000

Withdrawals

Tax-free if used for qualified higher education expenses

Tax-free if used for qualified higher education expenses.  If current law is not extended by Congress, this benefit will “sunset” in 2011.

Qualified Expenses

Tuition at a covered college.  Some plans may also offer room and board, but this is the exception, not the rule.

Tuition, fees, room, and board at qualified higher education institutions.

Flexibility

Administered completely by the plan, with no oversight by plan participants.

Professional asset management.  Many plans offer multiple options of allocation among mutual fund-like investments.  Participants may change their allocation choice once per 12 months.

Transfer-ability

Depends on the plan.

May transfer to another 529 plan once per 12 months.

Effect on Financial Aid

Considered the resource of the account owner.  As long as the account is not in the name of the student, only a small portion of the assets will be considered in the financial aid calculation.  If the account is not in the name of a custodial parent, the assets are not considered at all for financial aid.

Considered to be resources of the account owner.  As long as the account is  not in the name of the student, only a small portion of the assets will be considered in the financial aid calculation.  If the account is not in the name of a custodial parent, the assets are not considered at all for financial aid.