Billion Dollar Swindle - 529 Savings Plans
Believe it or not, most colleges salivate at the prospect of a needy student with a 529 Savings Plan. It enables these "poor" institutions of higher learning to reduce financial aid dollar for dollar and enrich their billion dollar endowment funds.
529 Savings Plans are a veritable hazard to the average family, and must be avoided at all costs. In the financial aid formulas, students have no asset protection allowance and the following are considered student assets: cash, savings accounts, stocks, bonds, savings bonds, mutual funds, UGMA, UTMA accounts, a farm, a business, mortgages held and the net value of any real estate owned. For college year 2007-2008, 20% of every dollar they have will be counted against them. However, if the student is about to enter college and is unfortunate enough to have a hefty bank balance or brokerage account, it already cost them 25% or 35%, depending on the college. Parents are more fortunate; they're only assessed at 5.6% over their allowance which increases with age. Example: older parent age 48 in a 2 parent family is $45,000; a single parent age 45 has only $19,700.
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If a family will qualify for assistance, and most do, then those with money in 529 Savings Plans face a far worse fate - all that money (often $100,000 or more) which could have been legally repositioned into financial vehicles that are not included in the calculations, will all be spent, often before graduation.
A number of states have made contributions state-tax deductible with North Carolina and Pennsylvania next in line. But here's the rub. A 529 Savings Plan is considered a parent asset when determining eligibility, and families will lose 5.6% of the value every year. What's worse is that colleges treat money in a 529 Plan as a resource, enabling them to reduce their offer dollar for dollar.
When confronted with the facts, financial aid officers nationwide have made comments such as: "Depending upon the value, there will be annual distributions to pay for tuition and fees." "Our calculations may vary from year to year." And this disturbing remark from a prestigious school in New England: "Financial aid is not the issue here, paying for the student's education is."
The sad truth is that literally tens of millions of dollars a year are unnecessarily wasted because families are not made aware of the consequences when setting up these accounts. Additionally, numerous brokerage firms have been sued and suspended for misrepresenting 529 Plans in general.
Reecy Aresty, a financial advisor since 1977, is the author of Getting Into College And Paying For It, an indispensable parent/student manual, the only book of its kind available in Spanish. For the past 25 years he's helped thousands of families send their kids to the college of their choice for less than they ever dreamed possible. His book is guaranteed to give students that all-important edge in admissions, and for parents there are numerous legal strategies to drastically cut the cost of college. Go to www.paylessforcollege.com for a free report, The College Funding Timeline, and learn what parents, students, and the media are saying about Reecy and his book for all seasons.
