SLM - Busted: Four Common Myths about 529 College Savings Plans

May 29 is “National 529 College Savings Plan Day,” the perfect opportunity to start mapping out your plan to save for college. Unfortunately, there are many misperceptions about 529 plans, how they work, and how to qualify. In fact, according to “How America Saves for College,” fewer than one-third of families are using 529 plans to save for college.

Sallie Mae^® busts four myths to help educate families on 529 college savings plans:

Myth: A 529 plan is expensive to open.
Reality: The minimum amount required to open an account varies, but many 529 plans require as little as $25. Some plans offer lower minimums if you enroll in direct deposit.

Myth: I have to use the 529 plan my state offers.
Reality: While each state offers at least one 529 plan, you can choose whichever plan feels right for you and your family. You have a variety of options to choose from, and many plans have different tax benefits. If you need help selecting the best option for you, a financial advisor can help.

Myth: I’ll lose the money in my plan if my child doesn’t go to college.
Reality: If your child doesn’t go to college, you can change the beneficiary to a sibling, grandchild, niece, nephew, or other relative. Even if you don’t use the funds for qualified education expenses, you may not lose the entire investment. Instead, you may pay a penalty and income tax on your earnings.

Myth: A 529 plan only covers tuition.
Reality: For K-12 private schools, yes, but for post-secondary education, 529 savings can be used for room and board, books, fees, and other qualified education expenses, in addition to tuition.

“Our research shows most parents are proactively preparing financially for college and more can benefit from opportunities to maximize their savings,” said Martha Holler, senior vice president, Sallie Mae. “It all starts with opening an account, and ‘National 529 College Savings Plan Day’ is a good prompt to do that and get started toward your college saving goal.”

Sallie Mae recommends the 1-2-3 approach to saving for college: first, open a savings account; second, set a goal and make deposits regularly; and third, explore tax-advantaged options such as 529 college savings plans.

For more information about saving, planning, and paying for college, visit SallieMae.com.

Sallie Mae (Nasdaq: SLM) believes education and life-long learning, in all forms, help people achieve great things. As the leader in private student lending, we provide financing and know-how to support access to college and offer products and resources to help customers make new goals and experiences, beyond college, happen. Learn more at SallieMae.com. Commonly known as Sallie Mae, SLM Corporation and its subsidiaries are not sponsored by or agencies of the United States of America.

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