3 Myths About 529 College Savings Plans

While many investors have discovered the tremendous benefits 529 plans offer, some may still have a few misconceptions about these tax-advantaged college savings accounts.

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Here are three common myths we debunked.

1. You can only use a Future Scholar 529 plan for South Carolina schools.

False. While Future Scholar is South Carolina’s 529 college savings plan, the money you save can be used for colleges outside of the Palmetto State.

In fact, funds can be used at any eligible educational institution in the United States, including out-of-state and some international schools. This includes two- and four-year public and private colleges, graduate and professional programs and certain vocational-technical schools.

To search for eligible educational institutions check out: http://www.fafsa.ed.gov/FAFSA/app/schoolSearch?locale=en_EN.

2.  I’ll lose my money if my child (or grandchild) doesn’t go to college.

Not true. If your child or grandchild decides not to go college, you can transfer the account to a new beneficiary as long as he or she is a relative of the original beneficiary.

And if your student receives a scholarship, you can withdraw up to the amount of the scholarship without a 10% federal penalty. The earnings on this withdrawal would be subject to federal and possibly state income tax.

What’s more, you maintain control of the account as the account owner and determine who will use the money.

3. You can only use the money for tuition.

Definitely not true. The money you save in your 529 plan can be used for other educational expenses such as fees, room and board, books, supplies and equipment required for enrollment or attendance at one of the eligible educational institutions mentioned before.

“We encourage all parents to get the facts and learn more about Future Scholar at www.FutureScholar.com,” said South Carolina Treasurer Curtis Loftis. “Because the truth is, saving with a Future Scholar 529 College Savings Plan is the smart, easy way to save for college.”

For more myths on 529 plans, visit www.heraldnet.com/business/debunking-5-myths-about-529-college-savings-plans.