A College Savings Plan for Every Family
Paying for college is a challenge for most families. But, we know the monetary and personal returns of a college education are worth the investment. But did you know that most students receive some form of financial aid? In fact, at several colleges in New Hampshire 100% of their students receive financial aid!
Still, saving anything you can to pay for college costs will absolutely help your child. Whether it helps him/her pay for books or borrow less in student loans, your effort will make a difference. And, in most cases, having personal savings will NOT negatively impact your ability to qualify for financial aid.
Therefore, we offer this information about Individual Development Accounts, 529 College Savings Plans and 529 College Pre-paid Plans.
IDAs
The New Hampshire Individual Development Account Program is a unique savings initiative offered through the New Hampshire Community Loan Fund that can help you pay for college, buy a home or a car or start or expand a small business. For every dollar you save up to $2,000, the NH IDA Program will contribute $3 in match. Your $2,000 can turn into a total of $8,000. Requirements to qualify for and remain in the program do apply. To learn more about the NH IDA Program, contact the Community Loan Fund on the web at http://www.communityloanfund.org/how-we-help/ida/how-we-can-help-you/education or call 800.432.4110.
A 529 college savings plan is a type of qualified tuition program that was established under Section 529 of the Internal Revenue Code. A college savings plan enables you to save money for a child's undergraduate or graduate level education in an individual investment account. College savings plans are established by states and typically managed by an experienced financial institution. Anyone can participate in a 529 plan regardless of income of the account owner and in most states, regardless of the age of the beneficiary. A 529 plan is considered an asset of the parent, and not of the student. Anyone can contribute to a 529 savings plan, up to the lifetime contribution limit, and there are no income restrictions. Savings plans earnings are based on the market performance of the underlying investments which typically consist of mutual funds. When selecting a portfolio for your investment you have two options. An advisor-sold fund allows your trusted financial advisor to select a portfolio for you; as a result you will pay a percentage of sales commission. A direct-sold fund allows you to choose the portfolio of investments yourself with no sales commissions and lower fees. Contributions into the 529 college savings plan grow federal and state income tax free. All withdrawals used for qualified higher education expenses (tuition, fees, books, supplies, room and board) are exempt from federal and state income tax.
529 Prepaid Tuition plans are guaranteed to increase in value at the same rate as college tuition. Essentially, by contributing to such a plan, you lock in tomorrow's tuition at today's prices. Prepaid tuition plans are broken into units (1% of current tuition). You can purchase as many units as you wish. One unit will be worth 1% of future tuition costs no matter how much tuition prices increase. These units are in the name of a child and can be presented at participating institutions, including institutions that join the program after the certificate is purchased. A prepaid tuition plan can be transferred to another member of the family, including children, parents, grandparents, cousins, nieces, nephews, aunts, and uncles. Prepaid tuition funds can only be applied to tuition and fees. One consideration to cover the total cost of college would be to invest in both a 529 Savings Plan (for books, supplies, room and board, other college expenses) as well as a 529 Prepaid Tuition Plan (for tuition). Currently, eighteen states offer a prepaid tuition program. And, there is a Private College 529 Plan with 276 schools in 39 states participating.
For details about 529 plans in general, visit www.savingforcollege.com.
For specific details about the State of New Hampshire's 529 savings plan, visit www.fidelity.com/unique. For the Private Pre-paid Tuition Plan, visit www.privatecollege529.com.
