The idea of having to pay for college is scary for any parent. However, the journey of a thousand miles begins with a single step. This first step can be starting a 529 College Savings Plan account. This is an investment account with great tax benefits, and high growth opportunity, to be withdrawn solely for the use of paying for education-related expenses. 529s have been gaining traction in the employee benefits space in the past few years (for good reason).
Having a separate investment savings account for college expenses often results in higher savings. People are less likely to take money out “here and there”, more likely to make regular contributions, and more likely to end up financially solvent when the time comes to pay for higher education.
Goodly is proud to announce that we are now offering 529 Plans to clients on our platform. This new feature will help employees of our clients manage the cost of higher education for their children.
Critical things to know about 529s
- Tax Advantages
- When someone has a 529 Plan, their investment egg can grow unhindered by taxes. Contributions can also be withdrawn tax-free and put directly into educational expenses.
- FAFSA Advantages
- Financial aid at colleges and universities in the United States base much of their decision on the income of the parents or guardians of the student. A withdrawal from a 529 is called a “Distribution”. Distributions from a 529 are not counted as income for financial aid applications, so you can qualify for a lot more financial aid than you might otherwise if you were investing in a traditional account, and still use your 529 to pay for a large portion of your college expenses.
- Access to tax-free funds
- You can withdraw your funds from your 529 for almost any college-related expense. As you can imagine, there are ways to take advantage of this for things other than tuition. You can buy textbooks, pencils, notebooks, etc.
A Growing Employee Benefit
Employee Benefit News (EBN) wrote an insightful article into our 529 Plan offering and why it is a smart investment for anyone looking to send their children to college. Shockingly, they revealed that “it will take the average student loan borrower about 18.5 years to repay their college debt, according to a survey by New York Life. During this time, employees may have to delay other long-term savings goals, like retirement, buying a home and starting a family”.
Our CEO and Founder, Greg Poulin, elaborated on EBN’s article about why it’s important to think early about saving for your children’s education:
“One of the nice things about a 529 savings plan for a lot of employees is it can help to break that vicious cycle of student loan debt,” Poulin says. “So if you’re paying off your own student loans until your mid-40s or so, by the time you pay off those loans, a lot of employees who have children getting ready to go off to college will either take out Parent plus loans or even withdraw from the 401(k).”
Allowing one’s children to go to college debt-free and stress-free is easily one of the greatest gifts a parent can give. If this sounds like something you or your employees would benefit from, schedule a demo, or reach out to us at [email protected].