Ohio's 529 Plan, CollegeAdvantage, welcomes the following guest column from Jeff Murray and Susan Ackerman. Their blog originally posted in the Thomas B. Fordham Institute website on July 10, 2023, and can be read here.
The end of our parental education journey is drawing near: Less than a year from now, both of our children will be looking at college graduation. Their K–12 trajectories were covered occasionally here (on the Thomas B. Fordham Institute website), including the various decision points we faced in trying to find them the best educational fit available and how Ohio’s evolving school choice infrastructure has helped and hindered us along the way. The goal since 2020 has been bachelor’s degrees, and those are finally in sight. So we want to end the ride on a positive note—with a little paean to Ohio’s 529 Plan, which helped make the last leg of the journey from high school graduation to college graduation successful and a bit easier than it otherwise might have been.
First up, a little primer. 529 plans are investment accounts designed to allow folks to save up over time for education expenses in the future and generally include some nice tax benefits, both while you save and when you ultimately use the money. They are commonly sponsored by states, and most states have them. You can open a 529 plan at any time and name nearly anyone as a beneficiary—including yourself—but they are most popularly used by parents to save up for their children’s future college expenses. Anyone can contribute to an established 529 plan, including extended family or friends. Ohio’s version, called CollegeAdvantage, began under a different name in 1990 and was one of the first in the country to adopt the new 529 (named after federal tax code) structure following its nationwide launch in 1996. It is overseen by the Ohio Tuition Trust Authority (OTTA).
From parents to parents, here are three ways that CollegeAdvantage has helped us and can help you and your children afford college.
Easy to start up
You can start a CollegeAdvantage account with as little as $25 via a simple application. Don’t have the time for or interest in deciding your account’s investment strategy in detail? OTTA offers several pre-set investments with specific options generated for you following a brief questionnaire regarding goals, timeline, and risk tolerance. Risk over time is a real concern, as with all investments, but even a small return is free money.
Deposits can be made at any time by a number of means, including payroll deduction. And while there are some maximums imposed (see below), the $25 minimum deposit seems tailor-made as a budget-friendly option to set it and forget it. Those deposits will add up before you know it.
There are no fees for participation—although you should look out for fees on the investments that can reduce yield—and information is provided regularly, as well.
Don’t miss out on Upromise, either. It’s a way to link your everyday spending on things like groceries and clothes and school supplies to retailers’ cashback programs. The credits go right into your 529 account like magic.
Ability to save over time, with tax benefits
The money invested in a CollegeAdvantage account grows tax-free and remains tax-free when used to pay for qualified expenses. (This doesn’t only mean four-year college tuition, by the way. Other undergrad expenses like room and board can be covered tax-free, as well as trade school, certificate programs, graduate school, and apprenticeship costs. Even K–12 private school tuition can be paid for via 529s.) Because of these tax advantages, OTTA says they offer “better growth potential than a typical savings account,” which has been our experience for the entire ride. Sometimes, way better.
Contributions to Ohio’s 529 plan are also tax deductible in the year they are made, up to a maximum of $4,000 per child per year. (That’s state taxes only, not federal, and every state does it differently.) What’s best: Anyone can contribute to a plan, so grandparents and aunts and family friends can turn a birthday gift or holiday celebration or lottery win into a long-term investment in a child’s future, with a tax benefit to boot.
When you have twins like we do, stuff generally enters the house in pairs (toys, clothes, etc.), and you really don’t need two of everything. But we were rarely successful at nudging family members towards college fund contributions as presents. We hope you have better luck than we did, and the new-ish UGift program might help. Keep trying!
However, we were diligent about plowing any surprise savings into our children’s accounts. The school options we preferred for our children meant that we paid tuition for most of their K–12 education, but for the three years our children attended the Metro Early College STEM School, a tuition-free public school, those extra funds went into the 529 instead. We also benefited from a couple of strong stock market rallies, as well. Here’s hoping for more of those in your future, too.
We didn’t do anything complex or fancy—we just started early and were slow, steady, and focused throughout. The mantra of “out of sight, out of mind” helped tremendously. We cannot overstate the value of budgeting, and it was probably second nature in some ways for us because we were used to paying out of pocket for K–12 education. But even the smallest automatic deposit will grow exponentially with enough time.
Start early, don’t stop, save whatever you can—and if a little extra comes your way, drop that in there, too.
Ease of distribution
The biggest surprise for us came when it was time to actually pay for college. It’s where the “this investment is actually real money” revelation finally dawned. As noted above, CollegeAdvantage funds are not just for college tuition, but since that’s where we were always headed, here’s what we know.
Colleges, particularly private colleges, are not as expensive as you might fear. Fill out your FAFSA, be honest about your financial resources, and talk to every institution rep you can find. Ask questions and really listen to the answers. College fairs are fun, interesting, and eye-opening. College visits are even better, and many schools will help pay for visits to make sure you get there and can see what they have to offer. It’s exciting to see your child’s name on a big welcome sign on a visit day—even more so if they happen to fall in love with the place.
Every college in the country will accept your 529 funds toward tuition, housing, and other fees. Both our kids went to college out of state, and there was no problem sending that Buckeye money to institutions in New York or That State Up North. While the size of your 529 account will be factored in ahead of the final tuition tally, it won’t impact scholarship consideration like other college savings approaches can. You can also choose how much of your investment you wish to spend at any given time. We split ours up across school years and semesters, but you can pay as much or as little of a given bill using 529 funds as you wish.
The bottom line: Having funds in a CollegeAdvantage account when you go to pay tuition means that your bill will be smaller. The more you have, grown tax-free over time and non-taxable when you use it on qualified expenditures, the lower the bill. We can’t say it more plainly than that.
*****
Just like choosing a middle or high school, prepping for college is about looking ahead and investing in your child’s future. With twins, we knew from the start that higher ed was going to be a major expense, and it was something that we wanted to make sure we could provide for our children. And when you know where you’re going, getting there becomes that little bit simpler...especially with high-quality help.
Financial stability has always been important to us, and having met in planning school, we are two people who are hardwired to always think ahead. We worked hard to pay off our own student loans while our kids were young, and then turned to their education needs for the future, hoping to use Ohio’s 529 plan to reduce their chances of accruing overwhelming college debt themselves. The end of the journey is almost upon us, and the education goals we set when we became parents have been met.
You can do the same, and CollegeAdvantage can help you, too.
About the authors:
Jeff Murray is the Ohio Operations and Editorial manager for the Thomas B. Fordham Institute. He is a lifelong resident of central Ohio. He previously worked at School Choice Ohio and the Greater Columbus Arts Council. He has two degrees from the Ohio State University and lives in the Clintonville neighborhood with his wife and twin daughters. He is proud every day to support the Fordham mission to help make excellent education options more numerous and more readily available for families and students in Ohio. You can read his work on both the Ohio Gadfly Blog and Flypaper, where he regularly contributes editions Gadfly Bites and the Ohio Charter News Weekly as well as short reviews of important education research papers.
Susan Ackerman is a Managing Director for Sellers Dorsey, leading the firm’s state practice in Ohio and focusing on client support in Medicaid finance, managed care, and provider policy and reimbursement. She is also the wife of Fordhamite Jeff Murray and mom of twins.
