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  • Writer's pictureErich Schwerd

2023 Saving for College with 529 plans

2023 Saving for College with 529 plans

In an article we published back in 2014, we discussed ways for parents to save for college, via a 529 plan. Back in 2014, the US student loan debt was valued at 1.2 trillion dollars. Today, in the year 2023, the US student debt has risen to 1.757 trillion dollars. Student loans are steadily increasing (Educationdata.com). College is effectively free in every other country in the world.  In the US, even in-state tuition and room and board can cost a small fortune.  You can take out loans, but this only ensures that you or your children will pay a large percentage of their income towards these loans, and possibly forever.  The way the student loan companies calculate interest, you can make their payments every month for 30 years and still owe what you owed in the beginning. But saving 50 or 100 bucks a month for 18 years can make college affordable. That is the reason we place such an importance on investing in a 529 plan.

A qualified tuition program is codified in section 529 of the internal revenue code. The program allows you to put funds into an investment vehicle. Taxes on the account are deferred until the funds are distributed. And, if the funds are used for qualified education expenses, the distributions will be tax-free. Qualified education expenses are tuition and fees, books, supplies, transportation, and other similar expenses for higher education. However, when it comes to what expenses are qualified, you must take a deeper look into what qualified truly means.  


The definition of “qualified” is very specific, and it must be met in order for the tax benefit to be allowed. Qualified expenses used to be restricted to college and university expenses. However, now, 529 plans can be used for elementary or secondary school, so K-12, to a maximum cost of $10,000 per year. For college and university, including technical and vocational schools, there is no limit on the amount of funds used. However, qualified education expenses does not mean that any expense during college can qualify. This does mean that tuition, fees, books, supplies, transportation (including parking), and other similar expenses can be qualified education expenses.

529 plans are a great way to save for your child’s future education. You can contribute up to $17,000 per year after tax, and then withdraw the money for qualified educational expenses at any time without paying taxes or penalties. If you have a child that is still in high school, or even in Kindergarten and anywhere in between, you may want to consider using a 529 plan as part of your overall savings strategy.

A 529 plan is similar to an IRA but has some key differences. There are also education savings accounts, called Coverdell ESA’s that can be used for education savings.  

Hanson, Melanie. “Student Loan Debt Statistics” EducationData.org, February 10, 2023,https://educationdata.org/student-loan-debt-statistics  

“Investor Publications.” SEC Emblem, 29 May 2018, https://www.sec.gov/about/reports-publications/investor-publications/introduction-529-plans. 


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