Gifting a Higher Education
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Pennsylvania’s students are carrying about 10% more debt than the average student in the country, so what better gift to give a newborn, infant, or teenager than a college education fund?
It may not come with a shiny bow and fancy wrapping paper, but the state treasury’s 529 College Savings Programs are appealing to Pennsylvania families who want to save big on higher education.
There are two PA 529 options Pennsylvanians can take: The Guaranteed Savings Plan (GSP), or the Investment Plan. The Guaranteed Savings Plan lets the state Treasury put participants’ contributions in a GSP Fund account, and then handling it via investment managers who trade stocks and bonds in an effort to at least match tuition increases. The account adjusts based on tuition inflation though, not the success or failure of the investments. This leaves the fund responsible for any investment losses, not the participant.
The other option is the Investment Plan, where the participant can choose from one of 13 investment options from Vanguard, which is an investment management company. This option does depend on the stock or bond choice the participant selects, meaning the return on the investment could be above or below the rate of tuition inflation.
Doug Rohanna, Deputy Treasurer for the commonwealth, said the college, university, or technical school, doesn’t have to be in the state in order for families to benefit from the 529 programs.
“In the Guaranteed Savings Plan, the benefit will be based on the tuition level for which you’re saving at, so you can attend a school in New Jersey, and receive a similar benefit as if you were attending a school in Pennsylvania,” Rohanna said. “In the investment plan, the amount of your earnings is based on the market, not the school you attend.”
Rohanna added there is no income eligibility requirement for enrollment in a 529 plan. However, the GSP plan requires the account owner or beneficiary to be a resident of Pennsylvania. Rohanna said it’s never too early, or too late, to start saving.
“Even if you’re child is [already] attending a career school or community college or a college or university, today you can save with the Investment plan, and still receive the tax deduction no matter how long you keep your money in the account,” Rohanna said.
State income tax deductions are eligible for participants who enroll by December 31st.