Some minor modifications to the tax code have made saving for college a little easier.
The 529 college savings plan, a targeted tax-sheltered fund for parents to save for their children’s college expenses, has expanded to include computers, according to Time.
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Before the change, computers were not considered necessary for higher education, and students had to prove they were required by the university before using funds from the 529. Students who withdraw from a semester due to illness can return their funds to the 529 to avoid a tax as well.
“These changes are intended to help 529 plans remain relevant as the college experience evolves,” Time reports.
529 plans hold about $258 bill in assets, according to the College Savings Plans Network. They were created in 1996, with the intent to have a convenient way for someone to save for future educational expenses, with tax benefits meant to encourage saving. Funds from a 529 plan can be used for tuition, fees, books, room and board, and a few other college-related expenses.
The use of the FAFSA, however, which determines financial aid a prospective student will receive, can be affected by a 529 plan. When reporting on family savings and income, information on the 529 is included, and that can reduce aid received from the federal government or the university. In effect, 529 plans can lead to some tax savings, but depending on a family’s income and savings levels, they could reduce overall financial aid.
