What To Do With College Savings Plan Money

There are a number of college savings plan programs available for students and their parents. When money is squirreled away for college, deciding how to spend it can be both exciting and challenging. College savings plan funds can be used to help pay for tuition, books or living expenses. Whether the program is a special tax-deferred government plan or a money-back retail spending service, the custodian and beneficiary have several choices on what to do with the funding. Depending on the type of account, there may be restrictions on how to use the money and how often it can be withdrawn.

Savings Account
Placing the money in a high yield savings account can help it to grow faster than it would in other types of accounts. Choosing the highest interest return rate possible will expand the dividends. Some private money-back programs offer a funds matching incentive for those taking the money from their account and putting it into a high yield savings account for a longer term. While there are some restrictions on withdrawal, those planning ahead will have more time for the money to grow. Savings accounts generally have no restrictions on how to spend the proceeds.

529 Plans
The 529 college plan is a tax-deferred long-term investment account. There is a federal plan which parents, guardians and students can use. Additionally, each state has at least one plan option. These college savings plan regulations are covered under the federal tax code Section 529. The dollars earned from money-back retail programs can be invested in a 529 account, as can a percentage of parents’ wages. Another option is to put monetary gifts into the 529 savings plan. When withdrawing the money from 529 accounts, it can be used for tuition, room and board and other related expenses. Certain plans allow the money to go only toward in-state schools, while others do not discriminate.

Student Loans
Depending on the type of long-term saving and investment account chosen, the dollars can be used to defray other education-related costs. For example, there may not be enough available to pay for school, but it can be used to pay down student loans. This helps to reduce interest accrued over the life of the loan or help to cover monthly payments starting before graduation.

Spend a Check
Some retail-based programs allow the beneficiary to receive a check. The student can then choose how to spend it. This means some of the hidden costs of education, such as expenses for books, food, clothing, project materials, transportation and rent, are covered as needed.

If you are interested in saving for college, having a 529 savings plan will help students with saving money for college.