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Veterans: GI Bill & 529 Plans Cover College Costs

There are over 20 million military veterans in the United States today and nearly two million men and women actively serving in our active duty, National Guard, and reserve armed forces. Upon entering their respective branch of service, each took an oath to “support and defend the Constitution of the United States against all enemies foreign and domestic.” Among the freedoms that this oath and this commitment to service protects is the freedom to choose a path of education, training, or certification that ensures a rewarding career and economic prosperity.  On this Veterans Day, let us take pause and express our gratitude to all those who have served and are serving our great nation, for the many blessings of freedom we enjoy would not be possible without their willingness to answer the call to service. 

U.S. Department of Veterans Affairs administers the Post-9/11 GI Bill. This federal assistance includes 36 months of education benefits: full in-state public school tuition and fees (there is a national maximum rate cap for tuition and fees for attending a private college), monthly housing allowance, and an annual books and supplies stipend.

If service members choose not to use these benefits for their own continuing education, they can transfer their unused GI bill benefits to their dependents — spouses and children. The education benefits can also be divided among the dependents, to pay for their college or vocational training.

A 529 plan can supplement this federal education aid. If the Post-9/11 GI Bill benefits are split among multiple dependents and can’t pay all the costs for each one, then a 529 plan can help cover the remaining qualified higher education expenses associated with attending a college or vocational school. Eligible expenses range from tuition; mandatory fees; computer equipment and related technology and services; books; supplies, and equipment required for enrollment or attendance; room and board costs or off campus housing during any academic period the beneficiary is enrolled at least half-time; and certain expenses for a special-needs student. Room and board costs can also include rent for off-campus residency and groceries (non-taxable items), provided these costs are equal or less than the same room and board allowances from the accredited education institution.

529 plans are a tax-advantaged way to save for college with tax-free earnings and tax-free withdrawals. Some states offer state income tax deductions or credits for 529 contributions. With Ohio’s 529 Plan – CollegeAdvantage, Ohio residents can currently deduct 529 contributions up to $2,000 per beneficiary, per year from their state income tax. However, with unlimited carry forward Ohioans can continue to deduct a large 529 plan contribution from their state income tax until all of it has been deducted. For instance, if they contribute $10,000 to your beneficiary’s account, they can deduct $2,000 from your state income tax for the next five years.

A 529 plan works well in conjunction with the Post-9/11 GI Bill. To learn more about Ohio’s 529 Plan, visit here. Why consider saving with CollegeAdvantage? Morningstar, a trusted investment research and management company, reviews the nation’s 529 college savings programs annually.  Ohio’s 529 Plan is proud to announce that the CollegeAdvantage Direct 529 Plan retained its silver rating. Furthermore, Morningstar upgraded the CollegeAdvantage Advisor 529 Plan to a bronze ranking. This makes Ohio one of eight states that have both their Direct and Advisor 529 Plans placed in best-in-class investment options by Morningstar. The high ranking of both CollegeAdvantage 529 Plans highlights the strength of these two college savings plans as well as the industry’s regard for CollegeAdvantage as one of the top 529 plans in the nation.

Other industry-trusted organizations has also highly regard Ohio’s 529 Plan. Kiplinger recently released its rankings for the best 529 college savings plans and the report recognizes Ohio’s 529 Plan as having best age-based portfolio for conservative investors. In addition, Kiplinger drew special attention to two of Individual Investment Options. Business Insider recently ranked CollegeAdvantage as the third best college savings plan in the nation. Savingforcollege.com, a trusted college-savings industry resource, analyzes the investment performance of the nation’s 529 plans on a quarterly basis and ranks them. Ohio’s 529 Plan is listed as first in the nation in the 5-year performance category and second in the nation in the 10-year performance category. 

What if parents, who have been saving for college in a 529 plan, have their child selected to attend an U.S. military academy? The proud parents still have access to the college savings funds. While considered a non-qualified withdrawal, the parents can ask for a 529 plan disbursement up to the estimated cost of attending the military academy without incurring a 10% federal tax penalty. The earnings portion only of the withdrawal will be subject to federal, state, and local taxes.

Tim Gorrell is the executive director of Ohio Tuition Trust Authority. Previously, he served as the director of the Ohio Department of Veteran Services. Colonel Gorrell, who retired from the U.S. Army after serving 31 years, is a highly awarded and decorated military leader. For more than 25 years, Ohio Tuition Trust Authority has sponsored and administered CollegeAdvantage, Ohio’s 529 College Savings Program. CollegeAdvantage oversees more than 633,000 accounts and over $10.88 billion in assets. Visit CollegeAdvantage.com or call 1-800-AFFORD-IT (233-6734) for more information.

Posted on November 9, 2017

Timothy C. Gorrell

OTTA Executive Director Tim Gorrell

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