Saving for a college education
A college education is among the most important investments students and families can make towards a rewarding career and future and the Texas College Savings Plan will help!
It required, like with any investment, very careful planning. So if you want to save money for a successful college education, check out these practical and easy ways to save your money for a college education:
Texas college 529 savings plan
The Texas College 529 Savings Plan is a qualified tax-advantaged 529 savings plan that offers many opportunities:
- Tax-free gains for investment
- Tax-free earnings withdrawal options for expenses related to higher education
- These include tuition, fees, room & board, books, transportation, and more
- The Texas College 529 Savings Plan includes numerous investment portfolios
- The Texas College 529 Savings Plan offers multiple savings options
The Texas College 529 Savings Plan is designed to support individuals and families from across the U.S. with their efforts to save money for expenses related to higher education.
Every U.S. citizen and all permanent residents 18 years old or older, no matter income or state of residence, can open a Texas College 529 Savings Plan bank account and contribute funds. Also, GED Diploma holders can apply for this plan.
Accounts can be established by corporations; partnerships; trusts; states or local governments; tax-exempt organizations; or custodians as well.
The goal
As you watch your loved ones grow up, you want to be sure there are no obstacles for them to reaching their full potential in the future. Sure, there are numerous scholarships available for students in Texas, but setting up a 529 Savings Plan is a great tax-advantaged idea.
Participating in a Texas College 529 Savings Plan is a tax-advantaged way to help your loved ones get ready for a great future. If you start investing in their education today, you’ll plant the seeds for their future and they can reap the benefits later.
The Texas College 529 Savings Plan is in fact sponsored by the state. These 529 plans are designed to help U.S. families, no matter their income level, save funds for a college education by offering tax-free growth options and withdrawals for qualified expenses related to higher education.
Texas State law requires every Texas 2- or 4-year public university and college to accept Tuition Units from the Texas Tuition Promise Fund as payment for tuition and fees even if the student is living out-of-state at the moment of enrollment, and assets in the account are not considered when you apply for state-funded financial aid.
Two 529 plans
In Texas, there are 2 types of 529 Plans: savings and prepaid.
The 529 prepaid plan only covers tuition and fees whereas the 529 savings plan may be used for qualified educational costs not covered by the 529 prepaid plan, for example, room & board, books, and several lab fees.
Participants can freely choose a type of 529 plan or combine the two plans into one program and have a plan that works best for your loved ones.
Education Savings Account (IRA)
Every taxpayer has the option to withdraw money from an IRA (Individual Retirement Account) without any penalty to cover the cost of higher education. This may be for themselves, or for their spouse, child, or even a grandchild. But an Education IRA is offering more opportunities.
For each of their children younger than 18, a family can deposit $2,000 annually into an Education IRA in each of the children’s names.
Earnings made in the Education IRAs are tax-free and no there are no taxes due as well upon withdrawal if the funds are used to pay for costs of a college education such as tuition, room & board, books, fees (minus scholarships, grants, or other tax-free assistance).
When the child has reached the age of 30, the Education IRA needs to be transferred to a younger family member or must be closed.
However, some restrictions apply. Students receiving tax-free distributions from Education IRAs, for example, may not benefit from the Lifetime Learning Tax Credit or Hope Tax Credit in that same year.
If you want more information about Education IRAs, go to the IRS website and explore publications on Education IRAs. For information about the acceptance rates of some major colleges in Texas, check out this post.
Interesting is also the College Access Loan (CAL) Program provided by the state of Texas to help students pay for college. These loans are for students who are not able to pay for attending college otherwise.
Texas Tuition Promise Fund
The Texas Tuition Promise Fund gives you the chance to pay for future tuition costs at a Texas public university or college at rates that are of today.
In the renewed Texas plan for prepaid tuition (Texas Tuition Promise Fund), you can prepay for your children’s future education and thus save lots of money.
The Texas Tuition Promise Fund is under management from NorthStar Financial Services and you can enroll every year from September through February. You may enroll newborns from September through July 31. If you require additional information go to the website of the Texas Tuition Promise Fund.
In Texas, college-bound students need to take the Texas Success Initiative (TSA) Assessment prior to being allowed to attend credit-bearing college coursework unless they have exempt status. So to keep the cost of tuition in hand, your children may go for earning college credit while taking the TSI Assessment.