By Fernando Torres |Staff Writer|
There has been an increase in the amount of money put into college saving plans over the past few years because of the rising cost of tuition and the struggling economy.
College savings plan, 529 is a government sponsored savings plan where anybody can put money into these college savings accounts. The purpose of this program is to plan ahead for future college expenses of the account’s beneficiary.
The tuition for higher education institutions has increased dramatically in the last few years in California; more people have been putting money into California 529 accounts.
According to the Los Angeles Times, the increase of money put into the 529 plan was 75 percent in the past two years.
The fear of college tuition increasing in the coming years has caused many parents to put more money into 529 plans. According to experts, a major concern for parents is that college tuition in the future will be too much and their children will not be able to afford school when they become college aged.
“Students and families are more concerned than ever about whether they’ll be able to afford college,” said Lauren Asher, president of the Institute for College Access & Success which is a nonprofit organization that helps students with affordable higher education.
According to the Los Angeles Times the average cost of a year’s tuition, room and board is more than $16,000 at public universities and $37,000 at private colleges right now.
Furthermore the Los Angeles Times reported that last year Americans put over $9 billion into government run college savings accounts. That’s up from $5 billion in 2008, but still fewer than the S13.6 billion from 2006.
The California government sponsored 529 program is run by Fidelity Investments. People in California have the option of which program to put their funds in either The ScholarShare College Savings Plan or ScholarShare Advisor College Savings Plan.
Right now there are more than 9 million 529 plan accounts in the United States totaling over $146 billion.
A beneficiary is named to account, one of the advantages to having a 529 plan is the donor has control of how the money in the account is used. The donor can also take out an unlimited amount of money from the account of any time, with no questions asked.
The money put into 529 programs can be invested into stock, money-market and bond funds. The money made from those investments is federal tax free as long as the money used is school expense.
Increases in the amount of money being put into the 529 accounts are because of the improvements made to the 529 programs such as more options on how to use the funds in the account. There is no fee for keeping the account open and the minimum money required for the account is $50.
There are no income or age beneficiary restrictions in opening an account.
The 529 plan only allows the donor the exchange the funds only one time a year, though.
For more information on 529 program visit www.scholarshare.com.