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On this Veterans Day, let’s express our gratitude to all those who have served and are serving our great nation. There are currently over 18 million veterans in the United States today and over 2 million men and women actively serving in U.S. armed forces, National Guard, and reserve armed forces. Our country enjoys many of the freedoms that would not exist without the military service members' willingness to serve for the greater good of the community.
A well-deserved benefit for the fighting men and women of our country is the Post-9/11 GI Bill. Administered by U.S. Department of Veterans Affairs (VA), this federal program assists in transitioning our veterans back to civilian life by paying their higher education expenses—whether undergraduate or graduate school, vocational/training programs, apprenticeships, and flight training. The GI Bill 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 if a veteran is in school more than half time, and an annual books and supplies stipend.
If service members choose not to use all of these benefits for their own higher education, they can use the Transfer of Entitlement Option (TOE) so their unused GI bill benefits can go to the service member’s dependents, either their spouses or children, to pay for their college or vocational training.
There are many other GI Bill programs to support our veterans’ pursuit of a higher education such as the Montgomery GI Bill Active Duty or Selected Reserve, Yellow Ribbon Program, and Tuition Assistance Top-Up. The VA also offers Tutorial Assistance for veterans to cover extra educational coaching.
529 plans work with GI Bill benefits
What are 529 plans? These specialized accounts 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 $4,000 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.
A 529 plan can supplement these service-earned education benefits. If you split your Post-9/11 GI Bill benefits among multiple dependents, then a 529 plan can help cover the remaining qualified higher education expenses associated with attending a two-year or four-year college, apprenticeships, trade 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. With the passage of the SECURE Act at the end of 2019, certain apprenticeship costs — fees, textbooks, supplies, and equipment, including required trade tools — can now be paid with a 529 plan withdrawal. The apprenticeship program must be registered with the Secretary of Labor’s National Apprenticeships Act in order to use a 529 plan withdrawal. Interested parties can check the Labor Department’s search tool to confirm that a program is eligible.
Military academy attendance and 529 plans
What if you’ve been saving for college in a 529 plan and your child is selected to attend an U.S. military academy? You 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 may be subject to federal, state, and local taxes.
Why save in Ohio’s 529 Plan?
Morningstar, a trusted investment research and management company, has given Ohio’s CollegeAdvantage Direct 529 Plan retained its silver rating. In addition, BlackRock CollegeAdvantage, Ohio’s Advisor 529 Plan retained its bronze ranking. This makes Ohio one of only four state programs that have both their Direct and Advisor 529 Plans ranked as medal class investment options by Morningstar. The high ranking for both CollegeAdvantage 529 Plans highlights the strength of these two college savings plans as well as the industry’s regard for Ohio’s 529 Plan as one of the best in the nation.
Savingforcollege.com is a trusted and independent college-savings industry resource. In its most recent quarterly analysis of 529 plan investment performances, Ohio’s 529 Plan has topped two out of four of the long-term performance charts. 49 states and the District of Columbia offer 529 plans. As of June 30, 2020, CollegeAdvantage Direct 529 Plan ranks first in the nation for the best investment performance in two different categories: five year and ten year.
Savingforcollege.com consistently recognizes Ohio’s Direct 529 Plan as one of the best plans in the nation for both Ohio residents and non-Ohio residents by giving the program a 5-Cap Rating. This designation is dependent on criteria that shows the college savings plan “offers outstanding flexibility, attractive investment, and additional economic benefits (such as generous state tax incentives) that for some people, at least, will provide a substantial boost to their savings. There are few, if any, weaknesses noted in the program.”
Ohio’s Direct 529 Plan is one of only two 529 college savings plans nationwide to earn a 5-Cap rating for both residents and non-residents, as of August 17, 2020. Ohio’s Direct 529 Saving Plan has received this recognition multiple times for the plan’s attractiveness for Ohioans and across the nation.
A 529 plan works well with the Post-9/11 GI Bill. To learn more about 529 college savings plans, visit here. Visit VA.gov for more information about the GI Bill education benefits, and the other many services and benefits available to military personnel and their families.
On this Veterans Day, let us pause and express our gratitude to all those who have served and are serving our great nation. Our many blessings of freedom would not be possible without their willingness to answer the call to service.
Tim Gorrell is the executive director of Ohio Tuition Trust Authority. Previously, he served as the director of the Ohio Department of Veteran Services. Col. Gorrell, who retired from the U.S. Army after serving 31 years, is a highly awarded and decorated military leader. For more than 30 years, Ohio Tuition Trust Authority has sponsored and administered Ohio’s 529 College Savings Program, CollegeAdvantage. Ohio’s 529 Plan oversees more than 653,000 accounts and over $13.5 billion in assets as of Sept. 30, 2020. Visit CollegeAdvantage.com or call 1-800-AFFORD-IT (233-6734) for more information.
Posted on November 9, 2020