NORFORK, Ark. — The 529 Savings Plan got a couple of big upgrades in 2024.
Two major changes are expected to have a positive impact on a student's financial eligibility.
If there are leftover college savings in your 529 account — Congress says as much as $35,000 can now roll over into your tax-free Roth retirement savings. That means any money not used for education funding can now go towards saving for your retirement.
It eliminates the fear for many parents that the money could forever go unused or incur taxes.
In 1996, lawmakers created the savings plan that could be opened for as little as $25. The money is invested, giving it more potential to grow over time. The accounts also have special tax breaks.
What are the other changes to the 529 Savings plan?
The second recent change is called "the grandparent loophole." Previously, any financial support that wasn't from the parent could impact the government's financial aid by as much as 50% of the contribution.
So, say a grandparent offered $10,000 worth of help, the government would reduce the financial aid support by $5,000.
This new loophole allows grandparents to use a 529 plan to fund their grandchild's education without affecting the student's financial aid eligibility.
So any cash support no matter the source, won't negatively affect financial aid eligibility.
Another change is contributions to 529 plans are considered gifts. That means you won't have to pay taxes on any money put into the account.
The annual gifting limit is $18,000 or $36,000 for couples.