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What sort of College Savings Programs are Offered by the US Government or States?
College education in the United State is becoming excessively expensive with each passing day. Various kinds of federal and non-federal financial aids are available for students However, not only are they difficult to obtain, but also they are often not enough to abbreviate the gap in the cost of education. In attempt to make higher education easily accessible to more Americans, the federal and state governments have developed qualified tuition programs, commonly known as 529 programs. There are two types of 529 programs; first, prepaid tuition plan and second, college savings program.
Prepaid tuition plan allows the parents and grandparents to lock in tuition in the current tuition rates, that is, prevalent in recognized public colleges and universities. At present, the state government operates these plans. Prepaid tuition plans not only provide better rate of return on investment, but also involve absolutely no risk to the principal.
College saving programs allow parents to make contributions to an account, which has been specifically created to pay for the beneficiary’s qualified higher education expenses as books, tuition fees, supplies and boarding. College savings programs are usually associated with investment risks, that is, their value fluctuate according to the market conditions and the investment strategy chosen.
Nowadays, college savings programs for states are typically managed by mutual fund companies. Hence, mutual funds are the most prevalent investment vehicles in these programs. Each state college savings program provides different investment options, and all these options require the creation of portfolio. The portfolio may either contain a wide assortment of investment strategies, or fixed number shares and bonds, whose composition automatically changes with time.
The state governments provide various kinds of tax benefits and incentives on college savings programs. The money in these programs grows tax-deferred, and if it is withdrawn for qualified higher education expenses, then it is tax-free. Moreover, college savings programs receive favorable treatment in student-financial-aid calculations.
Every state provides a variety of college savings programs, and no two programs are exactly alike. Hence, it would be worthwhile to conduct some research before selecting a particular program. A financial aid advisor can help you to find the best college savings program that will efficiently fulfill all your requirements. Some of the best college savings programs are as follows:
· New York’s 529 College Savings Program Direct Plan
· Michigan Education Savings Program
· Maryland College Investment Plan
· Future Scholar, South Carolina
· The Education Plan, New Mexico
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