Student loan borrowers who have enjoyed a pandemic hiatus are about to get snapped back to reality when payments resume. It’s also a reminder to consider options before borrowing.
can run on average $35,000 annually or $140,000 over four years for an undergraduate degree, so socking money away tax-free in a 529 plan can be a good option.Jesse Little, senior director of advice for Wells Fargo Wealth and Investment Management who is based in Palm Beach, Florida, says a 529 plan offers both federal and some state tax benefits when the assets held in the plan are used for qualified education expenses.
Depending on which plan a person chooses, maximum investments can exceed $500,000 over the life of the account, and deposits up to $17,000 per year per individual will qualify for the annual gift tax exclusion, Little said. "Furthermore, the account owner can save for anyone [including themselves] and can even transfer funds to another beneficiary as often as needed," Patillo said. "Gifting is also an option, so family and friends can also contribute."Another benefit in a parent or grandparent’s favor, says Patillo, is that 529s have a much lower impact on financial aid for higher education than other account types, as long as the account owner is the parent and the child is the dependent.
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