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The state will also provide one person $529 within the college savings plan, according to the Vermont Student Assistance Corp (VSAC), a non-profit agency that administers Vermont’s 529 college savings plans. VSAC is partnering with the Vermont Association of Hospitals and Health Systems to educate families in the state about saving for college for their children.
“College savings accounts are clearly a powerful tool,” Scott Giles, president and CEO of VSAC, said in the news release. “We want to encourage parents to open a VHEIP account and get started early to save for college and other career training. The ideal time to begin saving is between birth and age 5 in order to allow your investment to build over time.”
A 529 college savings plan run by a state is intended to help families set aside funds for future college costs. Although contributions are not deductible, parents can save and invest funds for their child’s education and then make tax-free withdrawals to pay for expenses. It’s named after Section 529 of the Internal Revenue Code, which first created these types of savings accounts in 1996.
Currently, more than 30 states offer a full or partial tax deduction or credit for 529 plan contributions, including Vermont. Contributions to the Vermont 529 plan of up to $2,5000 per beneficiary each year by one person, and contributions up to $5,000 per beneficiary each year if the contributors are married and file a joint tax return, are eligible for a 10 percent Vermont income tax credit, according to Saving For College.
As the cost of college continues to rise, 529 savings accounts can help limit the amount that students and parents need to borrow, while also helping to reduce future student loan debt. Research also shows, according to VSAC, that children with 529 plans are three times more likely to attend college, and four times more likely to graduate, compared to children without accounts.