By Larry Van Quathem, CFP®
As you watch the cost of college skyrocket, you may be trying to figure out the best way to pay for your child or grandchild’s education. More American families each year are leveraging 529 plans to help pay for the college or university education of children or grandchildren.
For the 2024-2025 school year, the average annual cost to attend a four-year public university was $24,920 for in-state students and $44,090 for out-of-state students. Those costs were up about 3.5% over the previous school year and up about 32% and 34%, respectively, over the last 10 years.
As the cost of a college education has risen, so has the number of 529 plans. The number of open plans rose from 16.4 million in 2023 to 16.8 million in 2024.
And now important changes make it even more attractive to open 529 plans to pay for your child’s education. You can talk to a financial advisor with ABLE Financial Group about education planning for your family.
What Is a 529 Plan?
A 529 plan is a state-sponsored savings account that allows money for your child or grandchild to grow and be spent tax-free if used for qualified education expenses. Qualifying education expenses include tuition, fees, books, and room and board. Forty-nine states and the District of Columbia offer 529 plans for colleges and universities. Wyoming is the only state without a 529 college savings plan.
The Changes to 529 Plans
The SECURE 2.0 Act, passed by Congress in 2022, introduced changes to entice families to take advantage of 529 plans. It expanded what qualifies as education expenses. You might find a 529 plan better fits your needs with these changes.
Rolling Over to a Roth IRA
While recognizing the tax advantage of 529 plans, some parents are reluctant to use the savings accounts, concerned about limits on the use of the money. However, as of 2024, if there is any excess money in the account (e.g., if your child decides not to go to college or receives scholarships or financial aid), it can be transferred to a Roth individual retirement account (IRA) for the 529 plan’s beneficiary.
The new law permits you to roll over up to $35,000 over a lifetime with the same annual contribution limit ($7,000 in 2025). This allows the money to still be used for the future of your child or grandchild, tax-free and penalty-free.
Paying for K-12 Education
The changes to 529 plans also expanded qualifying education expenses to include the tuition expenses for your child to attend private elementary, middle, and high schools. The amount that can be used for K-12 education programs is limited to $10,000 annually.
Covering Student Loans
If your child ends up with student loans, money from a 529 plan can be used over your child’s lifetime to pay down that debt. Since 529 plans don’t expire, the expanded provisions allow a student to spend up to $10,000 on student loans.
The money can pay for student loans for the beneficiary or siblings.
Pursuing an Apprenticeship
Is your child planning on pursuing a trade instead of attending college? A 529 plan can pay for that too. The plan pays for any postsecondary education at an eligible institution, including trade schools and apprenticeship programs.
Working with a financial advisor can help you take advantage of a 529 plan for your family.
Talk to ABLE Financial Group About 529 Plans
Whether you already have children or children are in your future, planning for your child or grandchild’s education can help you manage the rising cost of attending a college or university. ABLE Financial Group can help you plan for your life transitions, including sending your children or future children off to school.
We can analyze the cost of funding your child’s education and guide you to the most tax-efficient strategy to pay for it. Interested in learning more about our team and the ways we can help guide you? Call 480.258.6104 or email adam@ablefinancialgroup.com today.
About Larry
Larry Van Quathem is Senior Financial Advisor at ABLE Financial Group, a financial services practice that focuses on transition planning and simplifying the complexities of their clients’ wealth. Larry is an Arizona native who grew up in the financial services industry, as his father, Bob, became a Financial Consultant for Merrill Lynch when Larry was just seven years old. After earning a Bachelor of Science in Finance from the University of Arizona in 1993, Larry followed in his father’s footsteps just two years later. They worked together for more than a decade before Bob retired in 2009, and after gaining 20 years of experience at Merrill Lynch, Larry joined ABLE Financial Group in 2015. He saw it as a great opportunity to increase the quality of service for his clients and to have more control over how that service is delivered..
As a CERTIFIED FINANCIAL PLANNER® professional, Larry excels at listening to each client’s personal goals and offers tailored approaches to help achieve those goals using a written plan of action. He creates a personalized service model for every client, serving as a financial coach working with corporate executives, and a deep knowledge of the college planning landscape.
Larry is actively involved in the community, currently serving on the Board of Governors for the Boys and Girls Club of Scottsdale. His past community service includes serving on the Board of Delta Sigma Pi Leadership Foundation, the Board of Directors for the Association for Supportive Childcare and being a past active member of the Scottsdale 20-30 club. Professionally, Larry has been a member of the Central Arizona Estate Planning Council since 2010.
Residing in Phoenix with his son Jake, Larry enjoys golf in his leisure time. He also shares his home with his French Bulldogs, Rocky and Birdie.
