Will 529s continue to be a smart investment during the Obama administration? 529 College Savings Answers

When our readers and users of FreshmanFund.com send us questions, we'll post the answers here to help anyone searching for information on the best ways to save for someone's college education.

Will 529s continue to be a smart investment during the Obama administration?

Yes. Why? Covering costs and flexibility. President Obama has made affordable college education one the cornerstones of his administration. Already, Congress has passed the American Recovery and Reinvestment Act of 2009 with important changes to tax credits for education, among other things. The President has proposed the “American Opportunity Tax Credit,” which would offer a tax credit on the first $4,000 of higher education expenses to most Americans. According to the President’s proposal, this amount represents approximately 2/3’s of the average tuition cost at a state university. 529 funds may be used for much more than just tuition, including fees, books, supplies certain equipment and room and board (for those who are at least half-time students. IRS Publications, Ch.8, p.970, “Qualified Tuition Programs.” Should the credit become law (and remember, it is not law at this time), your 529 plan will help fund the balance at a public institution and provide your family with choice as to where to spend your education dollars as this tax credit does not apply to attendance at private universities.

In March 2009 President Obama took a few other steps to help families pay for college including a proposed increase in government Pell Grants for low-income families and revitalization of the government direct lending program for students (cutting out the middleman in these transactions, banks and private financial aid services). Not everyone qualifies for government assistance even should these proposals become law. Planning for your family’s educational needs therefore should always include a strong component of personal savings. A 529 Plan offers a smart option in this arena.

Share your thoughts: Has your 529 kept up with the market during Obama's time in office?