Plan for College: Saving for Higher Education

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Written by Horizon Bank   

college-savingsHigher education is the gateway to success. Attending a college or university enables today’s youth to develop the skills needed to build tomorrow’s future. As the cost of higher education increases, however, so does the need to save for your child’s educational future. Whether you want to establish a 529 plan, set up a prepaid college plan, create a trust or establish another option, there are many ways to create a savings plan for college.

What is a 529 plan?

529 plans are savings options, much like 401(k)s or Roth IRAs sponsored by states, banks and other institutions to encourage people to save for education. Contributions to the plan are placed into mutual funds and other types of investments.

Indiana’s CollegeChoice offers three different types of 529 savings plans to help parents, grandparents and others save for college. These plans allow families to invest in different types of mutual funds and other investments with varying degrees of advisor involvement.

Prepaid College Plans

Prepaid college plans are a type of education fund that allows individuals to purchase credits that “lock” tuition fees. Over time, parents contribute to this fund, and when their child attends college, the state, bank or other institution makes up the difference in the inflated tuition.

The Michigan Education Trust is the state’s plan for parents in Michigan who want to save for their children’s education with prepaid college plans that comes with several benefits as well.

Students have 15 years to use the funds for education. The benefits are transferable in the event the student gets a scholarship or chooses not to attend college. The trust is tax-deductible. If a student decides not to go to college, the monies can be refunded.

Can’t decide which option is best for you? This chart from the SEC explains the difference between these savings plans for college more thoroughly.

SEC-chart

You can also set up different types of investment funds or an individual trust to prepare for your child’s education in advance. Contact your local Horizon Bank branch today to learn which college savings plan is best for you.

 

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