Saving for college can seem like a daunting task, especially when you don’t quite understand all of the details of different military benefits. We’ve done the hard work to compile the need-to-know information so you can create the best college savings plan for your family!
Find out if you can transfer your GI Bill benefits to your children
One of the first things to research is to find out if you can transfer your GI Bill benefits to your children or other family members. Following 9/11, the GI Bill now covers the full cost of in-state tuition at public colleges for up to 36 months or four academic years, and up to $18,077 per year for private schools. Sometimes the bill may also provide a housing stipend and money for books and other associated college expenses. One of the greatest features of the Post 9/11 GI Bill is that longtime service members may transfer their benefits to a spouse or children. In order to qualify for this benefit, you must be on active duty or selected reserve, have served at least six years in the armed forces, and agree to serve at least four more years.
Learn all you can about 529 plans
1. Pick your plan type.
There are two types of 529 plans that can help you save for college: college savings plans and prepaid tuition plans. College savings plans are not directly connected to specific universities, but they do not allow you to lock in tuition rates. Prepaid tuition plans have state residency restrictions, but they allow you to lock in current tuition rates at specific colleges. Pick and choose your plan wisely.
2. Compare your plans.
Visit the U.S. Securities and Exchange Commission to get detailed plan information that will help you compare the different 529 plans.
3. Say goodbye to taxes on earnings.
If you only use the money for approved college expenses, you can make tax-free withdrawals from your 529 plan. However, you will still be required to pay federal income tax on any withdrawals that exceed your approved college expenses. You’ll also have to pay a 10% penalty on your plan’s earnings for unapproved withdrawals.
4. You can choose any state’s plan.
If you choose a 529 college savings plan, you’re not required to only use your home state’s plan; you can choose any participating states plan. This is meant to help military families who have to consider residency requirements if they relocate to many different states before their children leave for college.
5. Anyone can help.
Your family and friends can help add to your child’s 529 plan in place of different gifts throughout the year. Be sure to check your individual plan regarding gift tax liabilities regulations.
We hope these tips help give you a better idea of what it takes to create a successful and effective college savings plan. Do you still have questions about the best way to plan and save for college? Contact AFBN today to learn more about your college saving options.