Many prospective students planning to attend a Christian college are pleased to learn that college savings plans can be used at private schools. Private colleges, including Christian and other religious colleges, are included as long as they participate in this program.
What Are College Savings Plans?
A college savings plan, according to the Securities and Exchange Commission, is also called a “qualified tuition plan” and can be used for tuition and other school-related expenses. These plans take two forms, prepaid tuition plans that usually apply to an in-state public university and education savings plans, which will often be the type of plan applied to private colleges, including Christian schools. There can be state and federal tax benefits from having one of these types of accounts. One of the most significant implications that students need to consider when using qualified tuition plans is that these savings plans can affect financial aid eligibility.
Limitations on College Savings Plan Funds
According to U.S. News & World Report, college savings plan funds must be used for what are considered qualified expenses. When funds are spent on anything not considered an eligible educational expense, they are subject to a 10 percent penalty, as well as taxes. Some of the qualified expenses include tuition and fees, housing both on and off-campus, on-campus meal plans, textbooks and other supplies used for classes, laptops specifically required for classes, and computer software required for specific courses.
Restrictions on Location or Schools
A common myth that many have when looking at options for college is that the plan can only be used for in-state schools. Although prepaid tuition plans require that the funding be used in-state, college savings plans are not location-specific and are also portable. Any funds received in one of these plans are safe from loss, even if a student ultimately chooses a different school or opts not to go to college at that time. Funds from these accounts are always transferable to other beneficiaries. In the cases of students who receive scholarships, become disabled, or die, the account’s 10 percent fee can be waived.
Making Informed Choices Matters
One thing that is important for any student, as well as their parents, to consider is that there are differences in these plans that may have tax and other implications. Any plan used to help cover college costs must be well-managed, preventing any problems with a loss of funds. The investment funds that are part of the plan, such as ETFs or index funds, are also worth considering because having variety in options can make all the difference. Low or at least reasonable fees are also something to consider.
Knowing that a college savings plan can be used at a Christian college is often a source of relief for both students and parents. The combination of tax benefits and savings towards a school of choice is a good combination for families wanting to make the right choice.
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