According to Bloomberg News, Americans have gathered $464 billion in tax-advantaged college savings investment plans in June, which was up by $91 billion as compared to what it was 12 months ago, as per new data obtained from Federal Reserve.
With 529 accounts that are spread amongst 15 million families, it implies that the average plan is less than $29,000. This would pay for about 6 months towards tuition fees at an average private university, or for at least 12 months in case of any public university.
Bloomberg News reports that there are two kinds of 529 plans, prepaid tuition plans, and savings plans. The savings plan comprises mutual funds or the portfolios of mutual funds. The prepaid tuition plans allow the purchase of academic credits in the future at the prevailing costs.
529 plans permit people to invest money and then withdraw again to make payments for the college and few other educations related financial obligations without having to pay for federal income taxes on gains.
About 15 million households have put money into 529 savings plans, which was up from 10 million in 2011, as per College Savings Plans Network, Lexington Kentucky, according to Bloomberg News.
The rules that govern the use of the proceeds usually differ from one state to another. Some permit the withdrawals to pay towards tuition expenses for elementary, secondary, public, private, or religious schools, right from Kindergarten through Grade 12. There are instances, when the 529 plans will also cover expenses like rent, for equipment, which can include printers, laptops, computers, and even internet connectivity.
Many states, as per Bloomberg News enhance the value of the plans by benefits related to state-level taxes.