A 529 Plan is a government sponsored savings accounts that lets families contribute to a fund for their child’s education. You can read more about them here. While their intentions are good, these plans have a few disadvantages compared to a Studious Solutions policy.
- 529 plans are tied to the performance of other investment plans. Studious policies are not linked to the performance of investments. When your 529 plan might take a hit from recession, your Studious policy will remain unaffected. Your Studious Policy will still cost the same and offer the same coverage it promised originally.
- 529 plans are run separately by each state. This means the requirements and options of these plans are inconsistent. Making sure you are using your 529 plan correctly can be complicated. Studious policies are uniform to all 50 states, and the requirements to sign up and use policies are consistent nation wide.
- 529 plans have penalties for misuse. Along with taxes you might have to pay, 529 plans come with a 10% penalty on withdrawals for non-qualified expenses. A Studious policy pays based on the balance of student loans, so you do not need to be concerned about using the funds incorrectly.
- 529 plans count against you for federal student aid. 529 plans are considered family’s expected contributions on a FAFSA, thus decreasing your child’s eligibility for grants, loans, and financial scholarships. A Studious policy does not disperse money until after schooling, which means it cannot hurt your eligibility for aid.
- 529 plans can be very expensive. 529 plans have fees to the managers that grow with the balance of your account and many states have minimum contribution requirements that are hundreds of dollars. Studious policies are affordable and transparent. You will only be responsible for your monthly payment of premium plus sales tax.
Studious policies are a great alternative if any of these issues has convinced you not to open a 529 plan. We also believe in the good a 529 plan can offer if done correctly. We encourage you to look closely at the 529 plans offered by your state and invest in both a Studious policy and a 529 plan. Take loans that your 529 plan could cover. That way if your child completes their degree, they can pay for the loans with the 529 plan. If your child does not complete their degree, we can pay for the loan while the saved 529 balance sets your child up for a solid financial future.