Last week, we looked at college savings plans and the advantages tax-wise they hold as well as highlighting the obvious: college or any postsecondary education is and will be expensive, and it will be very challenging for most parents to fund college even partially without some planning.
That’s all a 529 plan does — give parents, grandparents, or even others the ability to sock away funds for college in a painless way with even a few tax advantages. So here’s the “skinny” on Georgia’s plan:
Path2College — Georgia’s 529 Plan
In addition to the federal tax benefits of a 529 plan, Georgia, like the federal system, does not levy a state income tax on the earnings portion of any withdrawal used to pay for qualified higher education expenses. Also, Georgia taxpayers can contribute and deduct up to $2,000 each year on behalf of any beneficiary regardless of their annual income. Georgia taxpayers are not required to itemize deductions to make this adjustment to income. Note that a transfer of funds from another state’s 529 plan is not eligible for the Georgia income tax deduction.
With the combination of tax benefits, Path2College projects tax savings of 10-15 percent based of course on the level of investment and performance of the plan over the life of a child. Path2College projects an annual investment return of around 6 percent.
Georgia also offers competitively low plan fees which include no sales charges, start-up, or maintenance fees. There is an annual asset-based management fee to cover the investment management and administrative services. This fee is computed annually at a rate of 0.28-0.41 percent of the average daily net assets of the 529 account. The Path2College 529 Plan is managed by TIAA-CREF.
In 2012, Clark Howard placed Georgia’s plan in his highest category, partially due to the low cost of managing the 529 (other states to make the list include Utah, Michigan, and Iowa). Similarly, Savingforcollege.com gave Path2College a 5/5-cap rating for Georgia residents.
Like all 529 college savings plans, Georgia’s plan can be used at any eligible school nationwide. Eligible schools include private and public colleges and universities as well as trade and graduate schools. With the tax and investment benefits tied into 529 plans, along with its portability, I was surprised to read that the Government Accountability Office cited that almost half of American parents saving for college are unfamiliar with 529 plans.
Here’s how easy it is: I have set up 529 plans for each of my seven granddaughters who range in age from 3 to 12. Twice a year, on their birthday and in early December, the plan automatically deposits an amount in each child’s account for each event, birthdays and Christmas and deducts from my bank account.
I get a notice of the payment into their fund and a quarterly balance report with earnings. I can control the investment plan and the good thing is that others, including parents, can contribute as well. The ease of administration through automatic deposit is virtually painless. No amount is too small and payments can be deducted automatically monthly or per pay period. These accounts might not ever rise to the level to pay all of college costs, but I am sure that a 529 Plan will be an important part of the overall plan.
Incidentally, 529 Plan savings can be transferred to a wide range of family members so there is no likelihood that the funds won’t be utilized if they are not used by the child originally intended.
Georgia’s 529 Plan along with the HOPE Scholarship can all contribute to keeping college students of the future in school and hopefully hold student loans to an amount more easily repaid.
For further information on Georgia’s 529 Plan, including information on how to set up an account, go to the following Web site: https://www.path2college529.com/index.shtml.
Path2College participants, please note that Georgia tax forms refer to the Path2College 529 Plan as “Georgia Higher Education Savings Plan” (GHESP); the Path2College 529 Plan is established by the GHESP.
I may be reached at
234 State Capitol, Atlanta, GA 30334
(404) 656-5038 (phone)
(404) 657-7094 (fax)
E-mail at Jack.Hill@senate.ga.gov
Or call toll-free at
1-800-367-3334 day or night
Reidsville office: (912) 557-3811