However, the outcome could have been different if the bug had occurred during a downturn, said Madeline Hume, a Morningstar analyst. She has recommended that you be familiar with the performance of your plan so that you can assess whether returns seem unusual and be careful when your plan notifies you of any changes. “It’s important to know what communication is coming out,” she said.
The company rates 529 plans on factors such as fees, investment options, and plan monitoring. Most plans are rated gold, silver, or bronze, which indicates that they offer a net benefit to investors. However, eight plans received “negative” ratings, mainly due to excessive fees.
Here are some questions and answers about 529 savings plans:
What college expenses can 529 funds be used for?
Savings in a 529 can be used to pay college expenses including tuition, room and board, mandatory fees, books, supplies, and required equipment.
Can I use 529 funds to pay for student loans?
Yes. According to a law passed in 2019, up to $ 10,000 from a 529 account can be used to repay a beneficiary’s student loan. An additional $ 10,000 each can be used to repay student loans borrowed from the beneficiary’s siblings.
Can grandparents save on a 529 account for a grandchild?
Yes – and an upcoming change to an important grant form, the Free State Student Aid Application (FAFSA), should help make this more attractive. Currently, contributions from 529 grandparent-owned plans are reported by the FAFSA as untaxed cash assistance for the student, which may decrease eligibility for financial assistance, financial aid expert Mark Kantrowitz said. However, an updated FAFSA will remove the issue of cash assistance, so distributions from 529 grandparent-owned distributions are no longer on the form. The change is expected to take place at FAFSA in late 2022 for the 2023-24 academic year.
However, the change doesn’t affect another form of tuition grant, the CSS profile, which is required by many more expensive private colleges, Kantrowitz said.
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