The plan provides a national savings account option for families, offering Ohio residents various savings choices for their children's education.
Nationally, the total college student loan debt is almost $2 trillion. In Ohio, that amount is almost $35,000 per student. But it’s possible to get ahead of mounting school debt. It’s called the 529 Plan, a way parents can save in advance for education. WYSO’s Kathryn Mobley spoke with Trisha Good, executive director of the Ohio Tuition Trust Authority. According to Good, this strategy offers a range of benefits to individuals and to families.
Trisha Good: 529 plans were created by the Internal Revenue Code in the 1990s to make college more affordable. Investment earnings grow tax free and withdrawals or distributions are not taxed when they're used for qualified expenses.
Kathryn Mobley: What are qualified expenses?
Good: Tuition required Fees. Books. Computers and related equipment and services and room and board on campus. Or the equivalent for off site housing as determined by each individual college or university. And then, more recently, the federal government has also included you can use your 529 plan for up to $10,000 for private K-12 expenses, for up to $10,000 for student loan repayment for the beneficiary and their siblings. And you also can use it for apprenticeship programs as long as the program is registered with the Secretary of Labor's National Apprenticeship Act.
Mobley: What are some of the benefits and actually who can contribute to the plan?
Good: The good thing about Ohio's plan is it only takes as little as $25 to get started. Ohio's 529 plan offers a gift option for anyone that wants to contribute to a loved ones 529 plan. The gift announcements are personalized cards that we can mail for you and they can be ordered through our website: www.collegeadvantage.com. Or you can call our customer service department by calling 1-800-AFFORD-IT. That's 1(800)-233-6734. So aunts, uncles, grandparents, family, friends, godparents anyone has the benefit of that state tax treatment.
Mobley: Which is?
Good: Ohio residents may deduct up to $4,000 per beneficiary on their state of Ohio tax return each year. It's really important to note that the $4,000 isn't a contribution limit. If an account owner contributes $6,000 in 2023, then they would deduct $4,000 on their 2023 tax return and the other $2,000 could carry forward and be deducted in future years.
Mobley: When is it time to start saving for this plan?
Good: You know, our response is it's never too early to start to save in a 529 plan. You can actually even establish the account with yourself as the named beneficiary before a baby's arrival and then transfer it to the child. Once you have the child's Social Security number.
Mobley: Trisha, can a 529 plan benefit an adult who's already working? But maybe they want to make some professional transitions?
Good: Yes, they absolutely could. There is no requirement that it has to be two individual persons. I could set up an account for myself and use it for professional developments. I know a lot of times when you think about college education, you know, people traditionally think about maybe a two year or a four year degree program or advanced degrees, but 529 plans are broader than that. They can be used for certificate programs, trade schools, apprenticeship programs. They can be used for qualified higher educational expenses at any eligible institution anywhere in the United States. And even in some cases outside of the United States, as long as they have a federal financial aid number.
The other thing that I would like to mention is if a beneficiary receives a scholarship or attends a U.S. military academy on scholarships, the account owners can withdraw the amount of the scholarship without the federal 10% penalty. However, they would still need to pay taxes on the earnings.
Mobley: And you're making it really easy to set up a 529 plan. How is that?
Good: So in addition to our easy to use website, which is college advantage dot com, we have a mobile app called ready save 529. You just need to download the app from your app store and select Ohio's 5 to 9 plan as your 529 plan. You currently can check your balances and make contributions right on your mobile device at any time.
Mobley: Tricia Goode, executive director of the Ohio Tuition Trust Authority. Thank you very much for talking with us about the 529 plan.
Good: You are so welcome.
