New College Savings Program Offers North Carolina Families a Solution for Minimizing Debt From Student Loans
Article Date: April 15,2010 – The North Carolina National College Savings Program has launched a new addition to its portfolio of 529 college savings plans that offers a conservative investment option for families looking to minimize their reliance on federal and private student loans to finance their child’s college education.
Available as of April 12, 2010, the new plan, the Federally-Insured Deposit Account, is offered by the State Employees’ Credit Union and “provides protection of principal and earnings, a competitive interest rate, and is insured by the National Credit Union Administration” (“NC 529 Plan Offers New Federally Insured Deposit Account Option,” College Foundation of North Carolina press release, April 12, 2010).
Anyone can open an account, either for yourself or for someone else, and anyone can be approved to contribute to the account.
While the North Carolina College Savings Program offers an array of 529 college savings options and allows for individuals to determine how they’d like to invest, based on things like age of beneficiary, the new Federally-Insured Deposit Account may appeal more to “conservative investors who want return without worry about investment loss, or perhaps have an older child who will soon be attending college,” says Shera Hube, vice president for marketing and savings at College Foundation, Inc., the company that administers North Carolina 529 plans.
All of the investment options offered through the North Carolina College Savings Program, including the new Federally-Insured Deposit Account, allow you to open an account with a $25 minimum contribution and to make subsequent contributions on your own schedule. You can change your current investment mix once a year, as allowed by the IRS, but can change the investment strategy of future contributions at any time. As an investor, you can contribute up to an annual maximum of $13,000 to a single beneficiary before incurring a federal gift tax.
Earnings on any of the North Carolina 529 accounts accrue tax-free from federal income taxes for both you and the account beneficiary. Withdrawals used for qualified higher education expenses are also exempt from federal taxes.
Although anyone can open a North Carolina 529 account and contribute, investors who are not residents of North Carolina are encouraged to check with their tax advisors first, as some state tax advantages are reserved for state residents. North Carolina taxpayers who participate in one of the state’s 529 college savings plans are eligible for state income tax deductions for contributions and are exempt from state taxes on withdrawals used for qualifying higher education expenses.
Many families are turning to North Carolina’s National College Savings Program to help avoid substantial debt from parent and student loans. By the end of March 2010, according to College Foundation, the program’s 41,000 participants — up 17 percent from the previous year — had invested close to $600 million.
Detailed information on North Carolina’s 529 college savings plans is available in the NC 529 Plan Program Description.
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