Just in time for Financial Literacy Month, Indiana University has launched a special information portal for employees interested in learning more about the state’s 529 college savings plans.
John Sejdinaj, IU chief financial officer, and Phil Schuman, IU director of financial literacy, worked together with representatives from IU Communications, Human Resources, the IU Alumni Association and University Student Services and Systems to create the new website to help answer employees’ questions about the special investment accounts designed to save money for higher education expenses.
“Pre-funding, or saving money for, college is significantly less expensive than post-funding college in the form of loans or other financial obligations,” Schuman said. “In addition, studies show that students who have some money set aside for their higher education are more likely to enroll in and graduate from college.”
While the university doesn’t provide or manage any 529 plans, the new website will help employees figure out how to get started saving for the future.
“Saving for college is one of the best investments a family can make to enhance a child’s future,” Sejdinaj said. “A college degree has many benefits, from higher lifelong earnings to increased health to civic engagement and happiness.”
Through the Indiana Education Savings Authority, the state of Indiana offers several plans: CollegeChoice Direct, CollegeChoice Advisor and CollegeChoice CD. What’s the difference? With a direct plan, you’ll manage everything yourself, while the advisor plan has a financial advisor managing the account. The CD plan operates much like a bank certificate of deposit, where it isn’t tied to investments but instead is an interest rate over the course of the deposit.
The minimum contribution to open a direct plan in Indiana is $10, Schuman said. Benefits include what he called a “triple tax advantage”: The money invested in a 529 plan grows tax-free; withdrawals are tax-free, as long as they are used for educational expenses; and Indiana plan owners who reside in Indiana receive a state income tax credit equal to 20 percent of their contributions, up to $1,000 per year.
The money can be used for any college, university, graduate school, trade or technical school that is accredited in the United States and is eligible to participate in federal financial aid programs.
Schuman offered a few tips for employees interested in creating a 529 account:
Do you have more than one child? Create an account for each one. Should one of them not attend college, you can change the beneficiary to another qualified family member.