529 College Plans: Shop Around & Save Fees
However, the result might have been different if the error had occurred during a downturn, Morningstar analyst Madeline Hume said. She advised becoming familiar with your plan’s performance, so that you can assess whether the returns seem out of the ordinary, and be careful when your plan informs you of changes. “It is important to keep abreast of communications going out,” she said.
The company rates 529 packages on factors such as fees, investment options and plan oversight, and most are rated gold, silver or bronze, indicating that they provide a net benefit to investors. However, eight plans received “negative” ratings, primarily due to excessive fees.
Here are some questions and answers on 529 savings plans:
What university expenses can 529 funds be used for?
Savings in a 529 can be used to pay for tuition, including tuition, room and board, mandatory fees, books, supplies, and required equipment.
Can I use 529 funds to pay off student loans?
Yes. Under a law passed in 2019, up to $ 10,000 from a 529 account can be used to pay off a recipient’s student loans. Another $ 10,000 each can be used to pay off student loans borrowed by the recipient’s siblings.
Can grandparents save in a 529 account for a grandchild?
Yes – and an upcoming change to a major financial aid form, the Free Application for Federal Student Aid, or FAFSA, should help make that more appealing. Currently, contributions from 529 plans held by grandparents are reported to the FAFSA as untaxed cash assistance to the student, which may reduce eligibility for financial assistance, the expert said. in financial aid Mark Kantrowitz. An update from the FAFSA, however, will eliminate the issue of cash support, he said, so that 529 distributions owned by grandparents will no longer be included on the form. The change is expected to take place with the FAFSA available in late 2022, for the 2023-24 academic year.
The change, however, does not affect another form of student aid, the CSS Profile, which is required by many higher-cost private colleges, Kantrowitz said.