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What's A 529?

 
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A 529 is a tax-advantage education savings plan designed to help students reach their full potential.

A 529 plan is a tax-advantage college savings plan designed to make post-secondary education more affordable for families. The Education Plan® is the name of New Mexico’s 529 college savings plan.

Why are 529 plans important for families?

Don’t be deterred by sticker shock. Financing a college education is a matter of combining several resources to accomplish the task. Not many families can afford the full cost of college. Paying for post-secondary education – college, vocational school, professional school or a graduate degree – usually involves a mix of:

  • Scholarships & Grants - Gift aid awarded based on a variety of factors, such as: demonstrated financial need, academic achievement, leadership and field of study
  • Need-Based Financial Aid - EFC (estimated family contribution) is subtracted from COA (cost of attendance) to determine amount of financial aid needed, need-based financial aid is determined based on the remaining amount
  • Work Study - Government funds allowing for part-time employment of eligible students
  • Personal Savings
    • 529 Plan: a tax advantaged plan that is used specifically to save for college expenses
    • Classic Savings Account: a traditional option that will earn a small amount of interest over time
  • Student Loans - These are private or federal and require repayment with varying interest rates

A 529 Plan is one element that can help to greatly reduce the future burden of student loan debt. Starting a 529 Plan early and saving as often as possible can reduce future out-of-pocket costs.

Why is it called a “529” Plan?

529 college savings plans are named for Section 529 of the federal tax code.  Congress created them as a way for families to save for their children’s post-secondary education. These plans let your earnings grow without federal tax, and the money you withdraw is also federal tax-free, as long as it’s used to pay for qualified education expenses.

If you’re a New Mexico taxpayer, your contributions to the plan can also be deducted from your state income taxes for post-secondary education.

Who can invest in a 529 Plan?

The Education Plan is offered to any U.S. resident no matter where they live in the U.S. Any U.S. citizen or resident with a valid Social Security number or a Taxpayer Identification Number (TIN) can open a 529 savings account. Most 529 account savers will be parents, but family and friends can open an account for a child or contribute to an account opened by someone else. You can even open one for yourself or your spouse!

Whether you’re new to investing or you’re an experienced investor, The Education Plan offers a variety of investment choices to meet your needs and risk tolerance.

Is a 529 Plan any better than a savings account?

529 plans are different than regular savings accounts and offer several potential advantages. First, while savings accounts are low risk, they currently credit a low rate of interest. 529 plans invest in mutual funds which have potentially higher risk but also the potential for higher investment returns. 529 plans also have tax advantages that regular savings accounts don't provide. Mutual fund investments are not guaranteed and can lose money.

What expenses do 529 plans cover?

529 plans are flexible. Your account can be used to pay for:

  • Tuition and fees
  • Books
  • Supplies and equipment
  • Room and board for beneficiaries attending on at least a half-time basis.
  • Computer technology, equipment, internet access
  • Expenses for educational special needs services
  • Up to $10,000 a year for K-12 tuition*
  • Transfers up to $15,000 a year to an ABLE account for the beneficiary*
  • Apprenticeship expenses*
  • Up to $10,000 for student loan repayment*

*If you are a New Mexico taxpayer, New Mexico and the federal government currently have different definitions for “qualified higher education expenses” for tax purposes. See this Important Notice to New Mexico Taxpayers for more information. 


1 The Plan is neither FDIC insured nor guaranteed and may lose value.
2 When withdrawals are used for other purposes, the earnings portion of the withdrawal is subject to federal income taxes and any applicable state income tax, as well as an additional 10% federal tax and the recapture of all previous New Mexico tax deductions taken for contributions to an account.

 

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The Education Plan® and The Education Plan® Logo are registered trademarks of The Education Trust Board of New Mexico used under license.

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For more information about The Education Plan, call 1.877.337.5268 or view the Plan Description and Participation Agreement, which includes investment objectives, risks, charges, expenses, and other important information; read and consider it carefully before investing.

Please Note: Before you invest, consider whether your or the beneficiary’s home state offers any state tax or other state benefits such as financial aid, scholarship funds, and protection from creditors that are only available for investments in that state’s qualified tuition program. You also should consult a financial, tax, or other advisor to learn more about how state-based benefits (or any limitations) would apply to your specific circumstances. You also may wish to contact directly your home state’s 529 plan(s), or any other 529 plan, to learn more about those plan’s features, benefits and limitations. Keep in mind that state-based benefits should be one of many appropriately weighted factors to be considered when making an investment decision.

The Education Plan is administered by The Education Trust Board of New Mexico. Ascensus College Savings Recordkeeping Services, LLC, the Program Manager, and its affiliates, have overall responsibility for the day-today operations, including investment advisory, recordkeeping and administrative services. The Education Plan’s portfolios invest in: (i) mutual funds; (ii) exchange traded funds; and/or (iii) a funding agreement issued by New York Life. Investments in The Education Plan are not insured by the FDIC. Units of the portfolios are municipal securities and the value of units will vary with market conditions.

Investment returns will vary depending upon the performance of the portfolios you choose. You could lose all or a portion of your money by investing in The Education Plan depending on market conditions. Account owners assume all investment risks as well as responsibility for any federal and state tax consequences.

Ugift is a registered service mark of Ascensus Broker Dealer Services, LLC.

The Education Plan® and The Education Plan® Logo are registered trademarks of The Education Trust Board of New Mexico used under license.

All other marks are the exclusive property of their respective owners.

Not FDIC-Insured. No Bank, State or Federal Guarantee. May Lose Value.