As student loan debts are at historic highs, new families are responding by investing in the next generation’s college savings. Record high funding of 529 College Savings Plans was recently reported by financial asset management company Strategic Insight.
Reports show that halfway through 2014 over $220 billion is currently held in college savings plans. Forecasts by the College Savings Plan Network say year-end numbers may reach close to $250 billion. The report does not reveal whether current plans are being funded at greater rates or more families are opening accounts. In any case, the importance of paying for education in advance is growing.
How important is a proper college savings? Earlier this year we shared how Google noted parents-to-be are planning for their children’s education before they are even born. Saving and planning well in advance is recommended for meeting any financial goal. Early funding of a 529 College Savings Plan can best provide for long-term growth. Contributions to 529 College Savings Plan grow tax-free and offer tax-free withdrawals for qualified expenses, such as tuition, books and room and board. 529 Plans are eligible for special gift tax rules, allow an owner to withdraw funds, and are at least partially exempt from creditors’ claims in many states ($25,000 in NC).
Here in the Triangle, the annual undergraduate tuition (resident rates) for the 2014-2015 academic year at the major universities ranges:
- Duke University $47,488
- University of North Carolina-Chapel Hill $8,336
- North Carolina State University Raleigh $8,296
By the time today’s newborns and children are entering college, rates will grow higher with inflation. 529 plans are not the only way to cover college expenses. There are other ways to contribute to a child’s higher education costs, and our Chapel Hill tax lawyers review ways of gifting for college here.