What is the NC 529® Plan?
“529” refers to Section 529 of the Internal Revenue Service code authorizing “qualified tuition programs” with special tax advantages to help individuals save for college. Federal law allows states to develop these college savings programs.
Officially known as the North Carolina College Savings and Investment Program and referred to as North Carolina’s National College Savings Program, the program is generally marketed under the shorter name, “NC 529 Plan.” The NC 529 Plan is open to residents of any state and funds can be used at any eligible college or university, anywhere in the country.
The NC 529 Plan is a tax-advantaged investment vehicle that allows you to save for college on behalf of a child, anyone else you designate, or even yourself. It’s specifically for higher education. The earlier you start, the better. The longer you have to contribute, the closer you’ll come to having money to help with your student’s education.
What can I use the money in an NC 529 Plan account to pay for?
Qualified higher education expenses are those such as tuition, room and board, a computer and related equipment, books, fees and other required equipment used while enrolled.
Why should I choose the NC 529 Plan?
North Carolina’s 529 Plan offers a wide array of investments, age-based and individual options that range from conservative to aggressive financial strategies. This college savings program is offered directly, therefore, there are no enrollment fees or sales charges when you enroll. Annual asset-based fees and fund expenses are low as is the monthly administrative fee; so more of each contribution goes toward savings for your beneficiary’s education. Though open to both in-state and out-of-state residents, the many North Carolina residents enrolled in the NC 529 Plan find it especially convenient to work with the state’s college savings program.
What if my child wants to attend an out of state school?
Savings in your NC 529 Plan account can be used at virtually any college in the country. The school must be an “eligible higher education institution” and that’s determined by whether or not the school is eligible to participate in the financial aid programs of the U.S. Department of Education. The institution also must provide programs of study that award an associate’s, bachelor’s, graduate or professional degree or other postsecondary credential; certain vocational or foreign institutions may also be eligible institutions.
How do I find whether my college choice is an eligible institution?
To find out if the schools you’re considering are eligible, use the Federal School Code Search available from the U.S. Department of Education at: https://fafsa.ed.gov/FAFSA/app/schoolSearch.
Enter the name of each school you’re considering. If a federal school code appears for the school you’re searching, then that means it is eligible to participate in the federal financial aid program. If looking for a foreign school, use the “State” drop-down to find other countries in which there are schools that are also eligible.
You also can double check eligibility by calling the Department of Education’s Information Center at 1-800-4-FEDAID.
What happens to the money in the account if my kid gets a scholarship, or doesn’t attend college at all?
The money in the account remains yours. You can transfer money to another account or name a new beneficiary with the existing account as long as the new beneficiary is a member of the family — even yourself. It’s important to remember that even substantial scholarships may not cover all qualified costs of education such as equipment or room and board, so your savings may still be needed. If you don’t use the remaining money for education, you can withdraw it, but will be required to pay state and federal taxes on your earnings and an additional federal income tax penalty of 10 percent.
How do I choose the investments in my NC 529 Plan account? Is there a lot of risk?
There are multiple options available from which to choose. Consider the level of risk you are comfortable with and then direct us to invest your money in the particular investment options you select. You can choose one or several different investment options from those offered. More details on risks and other important information are available at CFNC.org
Will I have to do a lot of research and analysis to keep my portfolio current and well balanced?
Many NC 529 Plan account owners decide to select one of the age-based investment options, which automatically exchange assets from one age-based option to the next, as your beneficiary gets older. You select an aggressive, moderate or conservative track and let us know the current age of your beneficiary when you open the account. The Program Administrator puts your beneficiary in the track selected and in the appropriate age group. Age-based tracks, made up of five separate age groups, are set up for five-year periods, for example, newborn through 5. The last age group is 19 or older the so the account can be open more than 5 years if desired. As your beneficiary ages, he or she will be automatically moved to the next age group based on birthdate. It’s a set it and forget it approach that gets more conservative as your beneficiary gets closer to college.
What investments does the NC 529 Plan offer?
For a short description of NC 529 Plan Investment Options, click here.
Investments are subject to risk and participants should carefully read the Program Description for North Carolina’s National College Savings Program (the NC 529 Plan) for more information. Go to http://www.cfnc.org/site/nc529/main/program_description.jsp.
Who can open an account, and who can be a beneficiary?
Anyone over the age of 18 with a valid Social Security number or other taxpayer identification number can open an NC 529 account. The named Beneficiary can be anyone — family, friend, even the account holder — of any age for whom the account owner plans to save for college. You can open a fund for a newborn or even a college-aged or adult student. You do not even need to be a resident of North Carolina.
Who can contribute to the account, and how easy is it?
Anyone — friends, family, even strangers — can contribute to the account once you’ve set it up. Contributions can be made in various ways: by automatic draft, check, funds transfer, payroll deduction, or by rolling over another 529 account into the NC 529 Plan. If you, as the account owner, want to share your account number with loved ones who wish to contribute, they may want to add to the account. Education contributions are a great gift to give loved ones on birthdays and holidays! The beneficiary may even contribute to the account when he or she gets that first job in high school. An NC 529 Plan is also a great way to start teaching your children about saving and investing for the future.
How much can I and others contribute to the account?
You and others can keep putting money into an account for your beneficiary in the NC 529 Plan as long as contributions for him or her don’t exceed the current maximum amount allowable. Contributions can be made periodically or regularly or even as a lump sum. Contributions can be as little as $25 or more if desired. Contributions to an account are generally considered completed gifts to the account beneficiary for federal tax purposes. Talk with your tax advisor for more information.
Should I open a separate account for each child, or just have one for the whole family?
Accounts are set up with one participant (account owner) and one beneficiary (the one for whom the participant is saving for college); a family account is not an option. If you plan to save for college for three children, then you open three different accounts. There’s no enrollment fee required on any of them.
When is the right time to open an NC 529 savings account? Can it be too early to start?
The earlier you start planning for your child’s educational future, the more prepared—and the more choices—you’ll have for his or her education. Opening an NC 529 account as soon as your baby is born can be a great way to prioritize education saving, and a good incentive to encourage other family members and friends to invest in your child’s future. Grandparents, relatives, and friends also can open their own NC 529 account with your child as Beneficiary if they prefer, as he or she can be the Beneficiary of more than one account.
Are we too late to open an NC 529 account?
It’s never too late to open an account. There are age-based investment options available in different five-year age bands, starting from newborn through 5 years old on up to 19 and older. There are also individual investment options in which to invest. There’s no cut-off age for being in the NC 529 Plan, you can save for a first-time college student, graduate or professional student, even yourself, if you plan to go back to school.