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Do Not Be Afraid To Save For College In Ohio 529 Plan

529 Tips

Face Your College Financing Fears

Since it’s Halloween, that scary time of the year, it’s a good time to face your fears – your college financing fears. Ohio’s 529 Plan, CollegeAdvantage, is happy to share the truth about 529 plans to help conquer your fears.

Fear: What if I have to pay to start saving in Ohio 529 Plan?

Fact: There is no fee to open an Ohio 529 Plan. To start a 529 account, you just need to make a contribution directly into it. It’s that easy. All contributions start at a minimum of $25. Ohio’s 529 Plan is recognized for our low fees with a 5-Cap Rating from, the leading independent source for information to save for and pay for a higher education. You shouldn’t be penalized for doing the right thing in saving for your child’s future higher education.

Fear: What if my child doesn’t want to go to college?

Fact: You always have access to the funds saved in your Ohio 529 account and you have options.

First, 529 plans can be used many types of higher education, not only four-year colleges or universities, but also two-year community colleges, trade or vocational schools, and certificate programs. If the program your child is interested has a Federal School Code, then you can use your 529 plans there. Therefore if your child wants to attend a welding school after high school, you can use your 529 plan to cover qualified costs there as long as the school accepts federal financial aid.

Also, 529 plans have no time constraints so you can wait to see if your child rethinks their decision about wanting a higher education.

If they still decide against continuing their education, you can transfer the 529 account to any family member, anyone related by blood, marriage or adoption. So the money you set aside for their higher education can be transferred to their sibling, their cousin, or even yourself.

There is also the option of withdrawing all the 529 funds. This will be treated as a non-qualified withdrawal; therefore, a 10% federal tax penalty will be imposed —comparable to an early withdrawal from a retirement savings vehicle — but only on the earnings portion of the withdrawal. You would also be liable for any federal, state, and local income taxes on the earnings.

Fear: What if I save in my state’s 529 plan but my child wants to go to an out-of-state school?

Fact: Your Ohio 529 college savings plan can be used nationwide at any federally accredited educational institution – whether for an associate, bachelor’s, graduate, professional, or vocational degree. If the school has a Federal School Code on the Free Application for Federal Student Aid (FAFSA), then you can make tax-free withdrawals to cover qualified expenses there.

Fear: What if I’m starting too late?

Fact: It’s never too late to save for higher education costs. Unless your student is in the last semester of their higher education, there’s still time to save, whether the future is next semester or next decade. Every dollar you save now is one that your child won’t have to borrow. Start your savings with a tax-advantaged 529 plan in which earnings grow tax free and withdrawals are tax free when used for qualified higher education expenses.

For Ohio residents who contribute to an Ohio’s 529 Plan account, they can deduct up to $4,000 from their Ohio state tax income tax for matching 529 contributions.  However, the $4,000 deduction limit is not a contribution cap. For Ohioans who contribute over $4,000 per account, per year, they can carry forward this deduction to their Ohio adjusted gross income for subsequent tax years until all of their contributions are fully deducted.

To further explain the unlimited carry forward of the state income tax deduction, let’s use two examples. An Ohio taxpayer contributes $4,000 to two 529 accounts for each of her two children, for a total of $8,000. She could deduct a total of $8,000 from her Ohio taxable income for the year. Alternatively, if an Ohio taxpayer contributed $8,000 to a CollegeAdvantage Direct Plan Account for one child in one year, he could deduct $4,000 from his Ohio taxable income during the current year, and also the next year.

Fear: What do I do with my 529 if my child gets a scholarship?

Fact: 529 plans are made to work with scholarships so your 529 plan is still an important component of your college-saving strategy. Very few scholarships cover 100% of the costs; for instance, a scholarship may only cover the cost of tuition.

A 529 plan is perfect for filling any gaps for other qualified expenses such as: room and board during any academic period the beneficiary is enrolled at least half-time; mandatory fees; computer equipment and related technology and services; books; supplies; and equipment required for enrollment or attendance; and certain expenses for a special-needs student.

You can withdrawal the exact amount of the scholarship from your 529 account. This would be treated as a non-qualified withdrawal, but only the earnings portion the withdrawal will be subject to federal and state taxes.  A scholarship withdrawal is exempt from the 10% federal tax penalty.

Fear: What if the 529 affects my financial aid?

Fact: If you own a 529 account for your child, the funds will only be included up to the maximum amount of 5.64% in the Expected Family Contribution (EFC) on FAFSA. Put another way, if you have $10,000 in a 529 plan, only $564 will count in the federal financial aid calculations.

Fear: What if I don’t know how to get started?

Fact: Ohio’s 529 Plan, CollegeAdvantage wants to help you! Ohio’s 529 Plan offers tools and calculators to shape your 529 plan. Crunch the numbers with the College Savings Planner to calculate estimated college costs and determine the monthly amount to contribute to reach your savings goals. If you’re wondering when you should start saving for their higher education, use the Cost Of Waiting Tool to see what a difference starting early can do for building up the 529 plan. The Tax Benefit Tool shows how a tax-advantaged 529 plan can grow when compared to a taxable savings account. Don’t forget, the sooner you start the 529 account, the sooner the power of compound interest and tax-free earnings can go to work growing the account. Use our blog page as a resource to find answers to more specific questions you may have.

If you’re ready to start saving for your child’s future higher education expenses, it’s simple to go online to open an account in minutes. A 529 account can be used for whatever comes after high school. lf you already have a 529 plan, then it might be time to review these life-stage account strategies or perform account maintenance.

Take steps today to conquer your college financing fear. There’s only one real fear with 529 plans — the fear of not starting one. Someday you’ll have to confront your college financing fears. Someday starts at

Posted on October 30, 2019

Ohio Tuition Trust Authority

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