Indiana 529 College Savings Plans Rise in 2020

While many students worry about paying off their student loans, the average cost of tuition in the United States has steadily increased two to three times the rate of inflation each year, according to the College savings plan network. The majority of federal financial assistance takes the form of loans, which increases the burden of student loans on graduates and families.

To encourage savings for college, the US Congress created Section 529 of the Internal Revenue Code in 1996, which stipulated that qualified tuition savings programs used for higher education expenses would be exempt. tax.

The state of Indiana offers its own tax incentives for CollegeChoice 529 Direct Savings Plans in which account owners earn an income tax credit of 20 percent of all contributions to a 529 account up to to a credit of $ 1000 per year.

Despite the financial challenges of the COVID-19 pandemic, Indiana saw an increase in its 529 total savings in 2020. According to a Jan. 26, 2021 press release from State Treasurer Kelly Mitchell, savings in 529 plans have topped $ 6 billion for the first time last year.

Ian Hauer, director of communications for the Indiana State Treasurer, said the 529 state plans continued to deliver positive investment performance.

How to Open a CollegeChoice 529 Savings Plan

529 plans can be opened and monitored online through the website collegechoicedirect.com. Registration forms can also be mailed to PO Box 219418, Kansas City, MO 64121.

  1. Complete the registration forms with the credentials of the account holder and beneficiary.
  2. Choose investments, usually an age-based portfolio that meets the needs of the beneficiary.
  3. Choose a funding method to open the savings plan – check or direct deposit from a bank account. The minimum contribution to open a 529 plan is $ 10.
  4. Account holders can change their investment portfolios up to twice a year.
  5. The savings can be used, without being taxed, on qualified higher education expenses, including rental fees, for any approved college or apprenticeship program in the United States.

Call the Indiana Education Savings Authority for assistance opening a 529 account at 1-866-485-9415.

Sources: Indiana Education Savings Authority and collegechoicedirect.com


How to pay your bills with 529 funds

For qualifying expenses, account holders can pay Ball State from their own bank accounts and reimburse themselves or their beneficiaries with 529 funds using an online form. To pay tuition and fees directly from a 529 account, open a student’s eBill and select “529 Savings Plan” from the “Make a Payment” drop-down menu. First, enter the login information for account 529, second, enter the invoice amount that is being paid, and finally, authorize the payment. Ball State charges a $ 10 service charge on 529 plans, which is deducted from the accounts in addition to the invoice amount.

Contact the Ball State Office of Bursaries and Loans Administration at 765-285-1643 or [email protected]

Source: Office of the Bursar of Ball State

“CollegeChoice 529 savings plans continued to enjoy solid growth, even during the challenges of the past year,” he said. “We have found that savers save and CollegeChoice 529 is a useful tool in helping families meet their education savings goals.”

Dagney Faulk, Ball State’s research director at the Center for Business and Economic Research, said she opened 529 plans for her two children – Delaney, 16, and LJ, 14 – when they were younger.

“It was mainly for the tax benefit, to be honest. It was a very good motivation for us, ”she said. “It’s very easy to set up. There are a whole range of options you can choose from depending on how that money is invested once it’s in the account. ”

529 plans offer organized “year of listing” portfolios that range from a concentration of over 80% in stocks to an 80% concentration in bonds and capital preservation investments.

“The stock market as a whole is doing very well this year – this is one of the options you can choose for 529 accounts,” Faulk said. “You can choose how much risk you take.”

Faulk said she believes the 2020 stimulus checks were a likely reason for the increased savings in 529 plans.

“[For] a family where both employees were able to keep jobs and get that extra stimulus money, it would make sense to try and save some of it to pay off debt or save, ”she said.

Faulk said she would encourage families who want to save for their children’s higher education or families who already have kids in college to open 529 accounts. Students have the option of opening an account for themselves as well as as long as they are at least 18 years old.

If students earn taxable income, Faulk said she would recommend that they open 529 accounts for themselves because of the potential tax credit. She said that students can save money for their own beneficiaries in the future if they don’t use all the funds for themselves.

Sharon Kelly opened 529 savings accounts for her two children, one of them for Logan Kelly, a sophomore exercise science student from Ball State, when he was 6 months old.

“Being able to help them pay for their university education was important to us,” she said. “We started the plan right after the birth of the two children and [have] has been contributing since then.

Kelly said the process of signing up for and using a 529 plan is relatively straightforward.

“Everything was automatically deducted from our bank account,” she says. “I didn’t have to write a check every month.”

Kelly stopped contributing to the account after her son graduated from high school and paid his tuition and apartment rent through 529.

“It’s a great way to have that money available to you when your kid hits college age,” Kelly said. “I don’t have to panic yet.”

Theresa Lindsey, mother of young anthropology Ball State, triple major in Spain and Japan Larsen Lindsey, opened a 529 savings account when her daughter was newborn. Theresa Lindsey enlisted a financial advisor to help her open the account.

“I had to sign forms and they explained the contributions to me,” she said. “I’ll say the only thing that hasn’t been passed on to me as well as I wish it was the penalty for withdrawing the money.”

If account holders withdraw 529 funds for ineligible expenses, the money withdrawn is subject to income tax and a 10% capital gains penalty. Lindsey said her daughter received scholarships to pay for her education and therefore wanted to withdraw 529 funds.

“Everyone wants their child to get scholarships, but that doesn’t always happen,” Lindsey said. “I am very grateful to him. She is currently a junior and has no debt, and we have used very little of her college fund.

Lindsey said that while the 529 plan has several advantages, account holders “need to be good at paperwork.”

“You [have to] keep all of your receipts, ”Lindsey said. “When you get money out of it, you have to be able to prove what you were using it for and that it was for school expenses.”

Lindsey said the remaining funds from her 529 plan will help pay for Larsen Lindsey’s graduate school.

Hauer said that 529 plans can be customized by account owners based on the investment schedule that works best for them.

“It’s never too early or too late to start saving for future education,” Hauer said. “Every dollar saved is a dollar less that must be borrowed in the form of student loans and paid off with interest.”

Contact Grace McCormick with your comments at [email protected] or on Twitter @ graceMc564. Contact Mackenzie Rupp with your comments at [email protected] or on Twitter at @ kenzieer18.





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