By Ashley Andrews (Estimated reading time: 4 minutes)
Planning for your child’s educational expenses might be one of your biggest priorities as a parent. Many investment plans exist for this purpose, one of which is the 529 plan. This state-administered investment plan is specifically used to save money for college, trade school, apprenticeships and related expenses. Each state has a different package and process for its 529 plans. Washington State, in particular, offers the Guaranteed Education Tuition (GET) program and the DreamAhead program through Washington College Savings Plans (WA529).
Here are the most frequently-asked-questions about these two popular plans.
The Guaranteed Education Tuition Program (GET)
The GET Program allows parents to pay for their child’s college tuition fees in advance. Each account covers one beneficiary and anyone can be the account owner, including the student beneficiary. Either the beneficiary or the account owner must be a Washington resident.
Can GET be used in private colleges or universities outside of Washington?
Yes. GET units are accepted in nearly any college, university, or technical school in the country, whether public or private. You can check if your institution is eligible by using FAFSA’s federal school code search feature.
Can I use the GET for other payments?
Yes. GET units can be used to pay for any qualified higher education expenses. This includes boarding fees and costs for school supplies required by the course.
What’s the difference between a unit and a credit?
The GET program makes use of units, which you buy, to pay for education expenses. The value of 100 units is equivalent to one year’s cost of resident, undergraduate tuition, and state-mandated fees in WA. They differ from credit hours, which have academic value and vary between institutions. GET units have a dollar value and will fluctuate depending on tuition costs at the time. So, if you purchase them early and tuition costs increase, you will have saved money on education fees.
What if a beneficiary chooses not to go to college?
Wait in case your child changes their mind. The program stays active for up to ten years after your child’s graduation. It is possible to transfer GET units to another family member who has an account.
Account owners also have the option to change the student beneficiary to another family member.
Lastly, you can request a refund. You would need, however, to pay taxes for any increase in unit value and pay a refund penalty.
The DreamAhead Program
The DreamAhead Program is a college investment plan that helps parents earn money to pay for their child’s education expenses. Each account covers one beneficiary and the account owner can be anyone of legal age. You don’t need to be a Washington resident to apply.
Can DreamAhead be used in private colleges or universities outside of Washington?
Yes. The DreamAhead program is acknowledged in nearly any college, university, or technical school in the country, whether public or private. You can check if your institution is eligible by using FAFSA’s federal school code search feature. It can even be used to pay for fees in international schools, so long as they are 529 eligible institutions recognized by the US Department of Education.
Can I use the DreamAhead for other payments?
Yes. Your DreamAhead account can be used to pay room and boarding fees. It can also be used to purchase computers, tablets, and other study tools that will be used by the beneficiary for educational purposes.
What if a beneficiary chooses not to go to college?
You can still keep the account. There is no age limit for using the money. Alternatively, you can opt to change your beneficiary to a different family member. Lastly, account owners may withdraw the money for non-education expenses. This, however, would incur a 10% federal penalty tax.
529 Plans Versus Other Savings Accounts
There are plenty of other investment vehicles that give you more control over your funds. Why choose a 529 plan over other savings account options?
Let’s say you open a brokerage account. This type of account holds the funds that the account owner will use to buy securities. It’s a popular college saving plan since the account owner has the freedom to invest in whatever assets they want. Plus, plenty of brokerage platforms require little to no minimum account balance, making it easy to apply for.
You could also opt to open a high-yield savings account, which gives you more opportunity to earn and the freedom to withdraw when you please. And unlike other investment vehicles, high-yield savings accounts are not exposed to market risk, meaning your return of investment is all but guaranteed.
The biggest benefit of a 529 plan compared to the above two is…the tax breaks. If you use your 529 solely for education expenses, you’ll end up saving more because of the tax reductions. This alone makes them more cost-effective than other savings accounts. Keep in mind that when you contribute to your 529 plan, it should be with the intention of saving and using it for education expenses.
Eager to learn more? Join us for a webinar and Q&A, 5 Steps to Saving for Your Child’s Education Plan with WA529 on Wednesday, May 12, 2021 from 7-8 pm!
Please note: This article is intended for informational purposes only and is not meant to take the place of advice from a financial advisor.
