*8 Reasons Why the 529 is the Best College Saving Plan *

ST. LOUIS, Feb. 19 /PRNewswire/ -- Financial blog <http://christianpf.com>, ChristianPF.com released an article discussing why the best college savings plan <http://www.christianpf.com/the-best-college-savings-plan-529/> is a 529 for most savers. The 529 college savings plan is probably the most flexible college savings option out there at the moment. It is named for Section 529 of the Internal Revenue Code, which created the fund concept and codified it in 1996. 529 Savings Plans function much like a *401k*<http://christianpf.com/how-much-can-i-contribute-to-my-401k/>  or *an IRA* <http://www.christianpf.com/what-is-an-ira-account/> – they are accounts into which you place funds that are then put into mutual funds or other mainstream investments.

The article goes on to explain how 529 plans are administered by state agencies, but the investing, record keeping and reporting is usually delegated to a commercial investment firm. Every state has at least one 529 in place and some have several.

An excerpt from the article...

*1. Impact on Scholarship and Financial Aid Eligibility is Minimal*

When a college financial aid office is calculating student eligibility for aid, they will only apply 5.64% of the 529 Fund value as an asset. If the student controls the fund, that same 5.64% is used to calculate the Expected Family Contribution (EFC) which is based on assets and income. For a standard student savings account, the financial aid calculation applies 20% of the balance. This protective feature is one of the major innovations of a 529 plan.

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*2. Tax Free when Withdrawn to Pay for College Expenses*

Unlike IRAs and other federal savings plans, these college funds are not subject to taxation upon withdrawal. They are a great mechanism for building a college nest egg that is subject to substantial tax benefits and that does not alter financial aid eligibility. Here are several ways that everyone in the family can contribute to building tax-free college funds.

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*3. Tax Breaks on Savings Contributions*

While your contributions to a 529 are taxed by the IRS, thirty one states and the District of Columbia offer breaks in state income taxes for 529 contributions. There are generally no limitations to your selection of a 529 plan – you can live in California, invest in an Indiana 529 and send your student to a Florida university.

*4. Students can Contribute Too *

If your student is working to help save college dollars, they can contribute to the 529 fund and not have their eligibility for financial aid come under scrutiny. High school students working part time aren't generally going to be paying federal income taxes, so those dollars are tax free going into the account and coming out.

Read the full article:

http://www.christianpf.com/the-best-college-savings-plan-529/

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