Plan Ahead – Maryland’s 529 College Savings Plans

 

College SavingsTuition costs at traditional four-year colleges are rising. While some ivy-league free online undergraduate costs are looking promising parents must continue to set aside funds to pay for their child’s upcoming college costs. One of the easiest and tax-friendly ways to pay for future educational expenses is to set aside money by establishing a 529 plan.

Moreover, a great resource, which explains 529 plans by providing a comprehensive overview can be found on the site OnlineColleges.net.

MARYLAND’S 529 COLLEGE SAVINGS PLANS #personalfinance #moms #savings

Maryland has two 529 college savings options for parents to choose from:

Prepaid College Trust –  

The 2012-2013 enrollment period has passed but generally runs from December – April 8th. Currently, only children from newborn to less than 1 year are eligible to enroll outside of the enrollment period. This plan covers in-state tuition and fees. The enrollment fee is $50 online and $75 for printed hard copy forms.

Thus, one of the greatest risk factors regarding this plan is that the deposits and dividends aren’t guaranteed by or insured by the Federal Deposit Insurance Corporation (FDIC) or any other agency.

Benefits:

  • Plans are transferable to another eligible family member when necessary.
  • The tuition savings are based on the year the account was opened. For instance, save enough to cover 1 yr. of service now, and it will also cover the child later when he or she is ready for college.
  • The plan doesn’t count towards the students’ assets if the parent is the account holder.
  • An annual percentage is not deducted for the management of the portfolio.
  • A 10-year grace period is provided from the projected year in case the beneficiary delays his or her education.
  • Tax benefits (see plan)

College Investment Plan

No enrollment fee. The $25 management fee is waived for people who contribute by allocating automatic deductions monthly. However, there is a program fee which equals 0.20/ yr of the assets of each Investment Portfolio. Typically the participant/account holder can subtract up to $2500 per year or another child or sibling can benefit from using the money. Consequently, qualified expenses such as computers, technology, book, room & board, tuition, etc can help reduce out of pocket cost when you apply funds from this plan.

Some benefits of this plan include:

  • Adults and children can enroll.
  • There is no specific enrollment period.

Furthermore, even if you move out-of-state you can continue to contribute or roll your plan over into another state hosted 529 plan. Similar to the trust mentioned above, one of the greatest risk factors regarding this plan is the money deposited and interest accumulated aren’t guaranteed by or insured by the Federal Deposit Insurance Corporation (FDIC) or any other agency. However, participants can change their investment choices yearly, which helps lessen the risks involved.

Benefits are:

  • Plans are transferable to another eligible family member when necessary.
  • The opening year of the account determines the tuition savings. For instance, save enough to cover 1 yr. of service now, and it will also cover the child later when he or she is ready for college.
  • The plan doesn’t count towards the student’s assets if the parent is the account holder.
  • Provides a wider range of eligible education expenses.
  • Tax benefits (see plan)

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Click here to view the Maryland enrollment kit, which explains both types of College Savings Plans.

Questions that came to mind

  • Which plan offers the least amount of fees? (Prepaid College Trust) if you use it as advised.
  • What is the itemized of eligible expenses for the trust?

Reader Questions:

What are your biggest concerns about saving for your child’s education?

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