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You are here: Home / college prep / What are the disadvantages of a 529 College Savings Plan?

March 7, 2016

What are the disadvantages of a 529 College Savings Plan?

In a prior post, we discussed the advantages of the 529 Plan. In this post, we will review some of the major disadvantages with the plan.

The disadvantages of the 529 plan:

  1. The money is an investment and therefore is exposed to market risk.
  2. Since the growth is tax deferred, the advantage of the program encourages market risk behavior.
  3. The investment may only be modified once each calendar year.
  4. The assets of 529 plans are reportable to the Financial Aid process as a parental asset.
  5. There are tax implication if the money is not used for qualified post-secondary education.

Remember, every family is unique, so your use of a 529 plan will also be unique. Also, as a note of caution, consult your your financial advisor, your Certified College Planning Specialist (CCPS) or your tax advisor for recommendations in your specific family circumstances.

A future blog will discuss approaches other than, or in conjunction with a 529 Plan, to assist in paying for college costs.

Article by John Butler / college prep

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