Thursday, January 29, 2009

College Tuition 529 Tax Plans

A recent donation request came to us by an anonymous phone call from a very nice student attending a familiar university. We have made a few small donations to this university in the past and the specifics were clearly available to this confident and well-spoken sophomore. The phone conversation was pleasant, familiar, and typical of previous years -- with one noteworthy exception. This student's personal story included the potentially jarring information that their family's personal plan to pay for college tuition somehow involved investing in mutual funds.

It wasn't clear from this casual conversation exactly what amounts and types of investments were involved -- just that past invested money was intended to generate enough additional money to pay for the remaining college career. Recently, THE WALL STREET JOURNAL reported this about college tuition 529 tax plans:
"For years, families have preferred the savings type of 529 plan -- named for the relevant section of the tax code -- salting away after-tax dollars, investing them in mutual funds and other investments, and then taking the money out, tax-free, when the time comes to pay for school. But as many of these accounts have been savaged by the market's plunge this year, families are now turning to the prepaid variety of 529 ... Research 529 plans at: or ."
Read more: More Families Move to Lock In Tuition Rate -- THE WALL STREET JOURNAL