What is a 529 College Savings Plan and How Does It Work [VIDEO]

1. What happens to a 529 plan if your child doesn't go to college?
2. What are the disadvantages of 529 plan?
3. Can you lose money in a 529 plan?
4. What is the benefit of a 529 education saving plan?
5. Why a 529 plan is a bad idea?
6. Does having a 529 hurt financial aid?

What happens to a 529 plan if your child doesn't go to college?

The simple answer is: No, you won't lose your money. The funds in a 529 plan can be used in a number of other ways if your beneficiary decides not to pursue higher education.

What are the disadvantages of 529 plan?

Here are five potential disadvantages of 529 plans that might affect your savings choice.

• There are significant upfront costs. ...
• Your child's need-based aid could be reduced. ...
• There are penalties for noneducational withdrawals. ...
• There are also penalties for ill-timed withdrawals. ...
• You have less say over your investments.

Can you lose money in a 529 plan?

True or false: I will lose the money if my child doesn't go to college or gets a scholarship and doesn't need all the money. False. You don't lose unused money in a 529 plan. ... You can withdraw the amount of any scholarship awards from your 529 without penalty; federal and state income taxes on the earnings still apply.

What is the benefit of a 529 education saving plan?

529 plan investments grow on a tax-deferred basis and distributions are tax-free when used to pay for qualified education expenses, including college tuition and fees, books and supplies, some room and board costs, up to $10,000 in K-12 tuition per year and up to $10,000 in student loan repayment per beneficiary and ...

Why a 529 plan is a bad idea?

A 529 plan could mean less financial aid.

The largest drawback to a 529 plan is that colleges consider it when deciding on financial aid. This means your child could receive less financial aid than you might otherwise need.

Does having a 529 hurt financial aid?

In most cases, your 529 plan will have a minimal effect on the amount of aid you receive and will end up helping you more than hurting you. There are also several steps you can take to increase your child's eligibility for student financial aid.