529 Plan and College Savings

Archive for July, 2005

You have undoubtedly heard much about 529 plans but what is a 529 Plan? Is the 529 Plan different from an Education Savings Account or Education IRA? The first step in understanding how a 529 Plan works is to know the answer to the fundamental question: what is a 529 Plan?

What is a 529 Plan?

The federal government allows states to establish qualified state tuition programs. These programs allow a person to contribute money to an account to pay for the qualified higher education expenses of a designated beneficiary.

What are qualified education expenses according to the 529 Plan?

Qualified education expenses include:

• tuition,
• room and board,
• fees,
• books,
• supplies and
• equipment required for the enrollment or attendance of the beneficiary at an eligible educational institution.

Where can I use 529 plans for?

Eligible educational institutions include:

• 2-year and 4-year undergraduate programs,
• technical schools as well as
• graduate schools and
• technical schools (which can include foreign schools as long as they can participate in programs under Title IV of the Higher Education Act of 1965).

Expenses incurred by special needs students attending an eligible educational institution are included in the definition of qualified education expenses. Contributions may only be made in cash.