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529 College Savings Plans
Statistics show college costs are rising about 5% a year, well above the rate of inflation. What does this mean for you? It's startling to realize that by the year 2020,the cost of a four-year college education at a public university is expected to be about $100,000. For a private university, the cost is expected to be about almost $260,000.1
State-sponsored investment programs have special tax status under section 529 of the Internal Revenue Code. A 529 Savings Plan, also known as a "qualified state tuition program" or "QSTP," provides for tax-deferred accumulation of all account earnings until the student makes qualified withdrawals for higher-education expenses. Qualified withdrawls are federal income tax free. 529 Savings Plans feature low minimum contribution requirements and higher contribution limits than the Coverdell Education Savings Account.
1 Source: College Board, "Trends in College Pricing 2002." Year 2002 - 2003 costs - which include tuition, mandatory fees, and room and board - are used to project hypothetical future costs, assuming a 5% rate of increase. www.collegeboard.com
*Please be aware there are potential risks and costs associated with 529 College Savings Plans. The exemption of qualified withdrawals from federal income tax will expire on December 31, 2010 unless extended by Congress.
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