In Stressful Times It Pays To Have a Plan
In Stressful Times It Pays To Have a Plan -- A 529 College Savings Plan
By: Sandra Liggett, JD, Chair, Education Trust Board of New Mexico
Ted Miller, Executive Director of the Education Trust Board of New Mexico
We have all had our lives disrupted in the last few months, and felt the stress that
accompanies that disruption. While our personal lives and the economy have been
disrupted, it is also the case that nationally we have increased our savings rate. This is
a reaction to the financial risks we perceive around us. This is a good first step – but by
itself it is not a financial plan.
A financial plan involves setting goals for our current needs and for the future.
Developing a financial plan and acting on it can help us reduce stress by reducing
uncertainty.
A good financial plan is especially important when it comes to funding higher education
and reducing student loan debt -- two of the biggest financial challenges families will
face in their lifetimes.
More than two decades ago the state of New Mexico created a plan, called The
Education Plan, which is a 529 college savings plan designed to help people save for
the long-term goal of funding higher education. It is among the lowest cost 529 plans in
the country.
The Education Plan can be used to pay for a wide variety of expenses such as tuition
and fees, room and board, books and supplies, necessary computer equipment and
software, and special needs equipment. It can be used to pay for these expenses at
schools nationwide – including community colleges, four-year schools, trade schools
and professional and graduate schools.
The Education Plan offers a variety of investments, including year of enrollment
portfolios. These portfolios are designed to maximize investment returns in the earlier
years and become more conservative as the time nears to use the funds.
The federal government has encouraged the growth of 529 plans by giving them tax
advantages -- such as no tax on earnings growth, and no tax on withdrawal as long as
the money is used to pay for higher education expenses.
New Mexico also provides a tax benefit for The Education Plan. New Mexico taxpayers
can deduct the full amount of any contributions that are made to the New Mexico plan
and used to pay for higher education expenses.
The Education Plan is a great way to save for higher-education expenses and to reduce the burden of student loan debt. It’s easy to set up a plan. It takes about 15 minutes. An account can be opened for as little as $1, and contributions can be made at any time in any amount.
Having a financial plan now for future higher education expenses can help us feel better
about today and the future.
Frequently Asked Questions
A 529 plan is a tax-advantaged investment account that is designed to grow savings for future education expenses for a specified beneficiary. 529 plans offer unique benefits and features that make them an appealing strategy for education related saving.
A 529 plan can be used for “qualified educational expenses.” For federal tax purposes, qualified educational expenses include:
- Tuition and fees at accredited higher education institutions
- Books
- Supplies and equipment
- Room and board for beneficiaries attending on at least a half-time basis.
- Computer technology, equipment, and internet access
- Up to $10,000 a year for K-12 tuition and expenses (Limit increase to $20,000 in 2026)
- Expenses for educational special needs services
- Transfers to an ABLE account for the beneficiary (transfer subject to annual limit)
- Apprenticeship expenses
- Up to $10,000 for student loan repayment
- Credentialing expenses and certification programs
- Roth IRA rollover for the beneficiary
If you're not sure if an expense is considered "qualified," we recommend consulting with a tax professional or advisor. Unqualified expenses will be treated like ordinary income: state and federal taxes will apply, with a 10% federal penalty for withdrawals from your 529 plan used to pay for them.
New Mexico residents can deduct contributions to The Education Plan from their state taxable income each year. This includes contributions made to an account that you are not the account owner of.
You cannot deduct contributions from federal income taxes.
Any person at least 18 years old with a valid Social Security Number (SSN) or Tax Identification Number (TIN) can open a 529 account. The account holder chooses the investment options, designates a beneficiary, and requests the distribution of funds.
The cost of college continues to rise, including tuition, housing, food and supplies, so it’s important to begin saving as soon as possible. You can learn more about how much a typical college education costs on our Cost of College page. It’s never too early or too late to start.
The Education Plan offers a variety of investment options to fit you and your family’s needs, risk tolerance and goals. You can see all of the available investment portfolios on the investments page.
Yes, you can use up to $20,000* a year to cover tuition and expenses for K-12 education.
Qualified K-12 expenses include:
- Tuition (public, private, and religious)
- Curriculum materials, books (including digital/online) and instructional materials
- Tutoring and instructional classes**
- Fees for a nationally standardized norm-referenced achievement test, an advanced placement examination, or any examinations related to college or university admission
- Dual enrollment program fees
Educational therapies for students with disabilities provided by a licensed or accredited practitioner or provider, including occupational, behavioral, physical, and speech-language therapies
*Starting in tax year 2026. The annual limit is $10,000 in tax year 2025 and permitted for tuition only.
**Tuition for tutoring or educational classes outside of the home, including at a tutoring facility, but only if the tutor or instructor is not related to the student and—
(i) is licensed as a teacher in any State,
(ii) has taught at an eligible educational institution,
or (iii) is a subject matter expert in the relevant subject.
You can open an account with The Education Plan online or by mailing in the enrollment form. In order to open an account, you will need the following information:
- Your social security number or TIN
- Your address
- Your bank account information (in order to fund the account)
- The beneficiary’s social security number or TIN
- The beneficiary’s birthday
-The beneficiary’s address
