By South Carolina State Treasurer Curtis Loftis, Administrator of Future Scholar College Savings Plan
Whether it’s a quiet lane, a winding trail or a busy highway – the roads we travel are as unique and distinct as the people who travel them. The paths we follow in life are much the same. Some are straight and predictable. Others are full of surprises, twisting and turning to reveal new and unexpected experiences.
When it comes time for young people to select the path that will lead to their future success, they want the freedom and flexibility to make the right choice for them. Families who choose to save for their children’s future with a 529 savings plan like Future Scholar gain the opportunity to grow their funds tax free and the flexibility to use those funds to put their children on the right path – one that will help them realize their dreams, whatever they may be.
The Traditional Route
When I speak with families across South Carolina, most understand that 529 plans are tax-advantaged savings plans that can help pay for four-year colleges and universities, as well as any qualified education expenses associated with attending these institutions.
It’s certainly true that 529 funds can be used at eligible four-year public and private colleges throughout the United States, as well as many international schools. They can also be used at two-year schools or for graduate school tuition should your child want to further their education with an advanced degree.
But as State Treasurer and administrator of South Carolina’s Future Scholar 529 plan, I want families everywhere to know that 529 plans are designed to give them the flexibility to save for a varied array of educational opportunities.
The Creative or Directed Route
Perhaps your child has chosen a path that doesn’t include a four-year degree. Does your child dream of becoming an artist? A dental hygienist? A welder? An electrician? 529 plans can also pay for technical school or, or for an apprenticeship that is registered with the U.S. Labor Department. Is your child inspired to become a hair stylist or a chef? You can use 529 account funds to pay for cosmetology school or culinary school as well as the qualified education expenses associated with attending.
In addition to tuition, fees, and textbooks, qualified education expenses include supplies, equipment, tools, computers, internet access, housing, and food.
K-12 Tuition
Do your dreams for your young child include a private K-12 school that charges tuition? You can withdraw up to a total of $10,000 a year, per beneficiary, to pay K-12 tuition at a public or private elementary school or secondary school. You won’t need to pay federal taxes, or state taxes in most states, when you withdraw funds to pay for K-12 tuition, just as you don’t pay taxes when you withdraw funds to pay for higher education.
Student Loans
In 2019, Congress passed the SECURE (Setting Every Community Up for Retirement Enhancement) Act, expanding the benefits of 529 plans. The SECURE Act allows people who save with a 529 plan to withdraw up to $10,000, per borrower, to repay student loan debt. $10,000 is the lifetime cap on the amount of 529 funds that an individual can use to pay back student loans.
And 529 plan flexibility doesn’t end there. If your child doesn’t need to use all of the funds in a 529 account, you can change the beneficiary to an eligible family member, such as a sibling, parent, or even a future grandchild. For example, if you have a child who didn’t use all of the funds in a 529 plan, those funds can be transferred to a sibling to be used to pay their qualified education expenses or to pay down their student loan debt.
The Right Path
With a Future Scholar 529 plan, your savings can grow tax free. Most importantly, the funds you save will provide your child with greater flexibility to choose the right educational path that aligns with their unique goals, gifts and abilities. Open a Future Scholar account today and begin saving for your child’s educational journey.
About the author: Curtis Loftis is the State Treasurer of South Carolina. He also serves as the administrator of South Carolina’s Future Scholar 529 College Savings Plan. Visit treasurer.sc.gov or futurescholar.com for more information on ways to save through a 529 plan.
