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Making Cents: College


The Accounting Industry: Can Firms Keep Up?

The Most Common Way to Save for A Seat at the University


Unless you have never turned on the news, glanced at your phone, or spoken to anyone with an opinion on the matter, you likely have heard about the growing student loan debt issue going on in this nation. According to the Education Data Initiative, nearly 43 million student borrowers are currently in debt by an average of around $39,351 per borrower. If you are like me and grew up in a small town where most of the people around you are not exactly made of money, you likely know of many people who simply were not able to afford to work towards receiving a degree from a university


If you or someone you know is planning on attending college in the future, you likely would not want to take out any student loans if at all possible. So, what can you do? While attending college can be rather expensive, one of the most common ways of paying for a seat in class is to utilize a 529 plan.


If you’ve never heard of this plan, a 529 is a great way to begin saving money for educational expenses in the future. They are named after Section 529 of the Internal Revenue Code, and they are designed as tax-advantaged savings plans that allow someone to save & invest money for education expenses that may be incurred in the future. So, how do they work?

Essentially, 529 plans are broken up into two broad categories: Prepaid Tuition Plans & Education Savings Plans. Let’s begin with the first of these two plans.

Prepaid Tuition Plans: This plan allows someone to purchase credits from any participating colleges and universities, which essentially allow you to prepay for tuition at the present tuition rates to then be used at a later date. However, it is worth noting that this particular plan does not cover expenses such as room and board while attending college.


Education Savings Plan: Plans of this nature allow someone to open an investment account that can be used to pay for future qualified higher education expenses. These expenses include tuition, any mandatory university fees, along with room and board. Anyone who utilizes this type of 529 plan will usually choose between a myriad of different investment options. The proceeds from these investments can then be used for any qualified expenses.


With almost 15 million 529 accounts currently in use here in the United States, these plans have certainly become a very popular form of planning, preparing, and saving for college & university expenses in the future. As mentioned earlier, many people struggle with being able to pay for higher education expenses. By utilizing a 529 plan, you may be setting yourself or a loved one up for success in the future.

There are multiple other defining factors for each of these 529 plans, but this article is simply to allow you to gain a surface level understanding of the purpose that these plans serve. We may dive into more of the specifics of each plan at a later date, such as the tax implications of each plan, any restrictions that apply to these plans, and what expenses & fees come along with these plans. However, for now I hope that having this basic understanding of these plans will allow you to better navigate the gray areas of the financial world, and maybe even begin saving money for you or someone you know to attend college in the future.


By: Daniel Trentham, Marketing Coordinator at CROFT & FROST








Sources: https://www.sec.gov/reportspubs/investor-publications/investorpubsintro529htm.html

https://educationdata.org/student-loan-debt-statistics








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