When did 529 college savings plans start?

When did 529 college savings plans start?

Education savings plans were first created in 1986, when the Michigan Education Trust (MET) established a prepaid tuition plan. More than a decade later, Section 529 was added to the Internal Revenue Code, authorizing tax-free status for qualified tuition programs (also known as 529 plans).

What is the 529 plan and how does it work?

A 529 college savings plan is a specialized savings account that is used to save money for college. Each 529 plan account has an account owner, who controls the investments and selects the beneficiary, and one beneficiary. The account owner and beneficiary may be the same person.

What happens if you don’t use all of a 529 plan?

If you truly have no other use for your leftover 529 plan savings, you can always take a non-qualified distribution. Your contributions will never be taxed or penalized, since they were made with after-tax dollars. Any earnings on your investments, however, will be subject to income tax as well as a 10% penalty.

Who owns a 529 plan?

All 529 plan accounts have an account owner and a beneficiary, with the account owner controlling the account. An individual 529 account is a regular 529 account, with an adult individual as the account owner and a student as the beneficiary. The account owner makes the investment decisions regarding the 529 account.

How many Americans know what a 529 is?

Only 36% of Americans were able to identify a 529 as an education savings tool, and only 20% of parents say they have used a 529 account or are planning to use one.

Should 529 be in child’s name?

While 529 plans do affect college financial aid, keeping the plan in a parent’s name with the child as the beneficiary will minimize the hit, explains Mark Kantrowitz, publisher of savingforcollege.com. Aid is calculated based on the notorious Free Application for Federal Student Aid (Fafsa).