Money in a 529 plan may be used cover a wide range of expenses related to higher education. As we go through this section, we will also delineate between expenses allowed federally, but may not be allowed by some states. Qualified expenses include tuition and fees related to attendance to the educational institution. It’s important to note what the IRS considers a qualified education institution. A qualified educational institution is generally a college, university, tech school, or other institution that participates in the Department of Education’s student aid program. This include public, private, non-profit and for-profit higher education institutions. Room and board expenses also qualify, but there are certain conditions. The student must be enrolled at least half-time at the school. Expenses are also limited to the actual cost of the room and board if the student is living in housing operated by the institution, or if living off campus, […]
student loans
The SECURE Act and Student Loans
The recent passing of the SECURE Act brought about some changes that have impacted savers and retirees alike. Required minimum distributions (RMDs) from retirement account have now been raised to age 72. Also, gone is the ability to “stretch” required distributions from retirement accounts to non-spouse beneficiaries (with few exceptions). One potentially beneficial change comes from the broadening of the expenses 529 college savings plans can cover. 529 plans are tax-advantaged savings plans that allow parent, grandparents, and other relatives to save money for education. Contributions grow tax-deferred and withdrawals for qualified expenses are tax-free. In the past, qualified expenses included, tuition, books, fees, etc. With the passing of the SECURE Act, another provision has been added that allows account owners to pay for student loan principal and interest. This new rule allows up to $10,000 maximum to be used to pay for outstanding student loans. In addition, the SECURE […]
Share, tweet, print, email, like or pin this post:
Student Loans Are Not Carte Blanche
For many college bound and current college students, the arrival of the financial aid reward can seem like winning the lottery. For some students, this sum of money is more than they’ve seen (in one sitting) in their entire lifetime. The temptation to think of it as a “paycheck” rather than what it is – a liability – can often lead students to make less-than-optimal decisions when it comes to allocating those borrowed dollars. When it comes to student debt it’s helpful to think of it as just that – debt. This is money that is supposed to go towards the costs of higher education. If and when you are in the position of getting your reward money, consider the consequences of using the money to finance unnecessary purchases. Remember, this is debt. It will have to be paid back someday and with interest. When you get your financial aid […]
Share, tweet, print, email, like or pin this post:
Should I Pay Off Debt or Save for Retirement?
Over the last few weeks I’ve gotten quite a few questions from individuals ready to graduate college and start embarking on their first job. As is often the case, many of these individuals have varying amounts of student debt but also understand the importance of saving for retirement. Naturally, a common question is should they pay off student loans or save for retirement. Here’s my take. As I’ve mentioned in previous posts, there are few ways to receive guaranteed returns. One of those ways is by paying down debt. This is an example of a guaranteed rate of return that is also risk free. By paying off a loan early, the interest that would have normally gone to the lender ends up in your own pocket. The good news is that the debt is retired faster, and the individual experienced zero volatility exposure compared to investing in the market. On […]
Share, tweet, print, email, like or pin this post:
How to Pay Off Students Loans and Save for Retirement
Very often in my classes I get asked the question “What should I do first, pay off student loans or save for retirement?” My goal is to give some perspective on approaching these two very important issues. Generally, holding student loans and making the minimum payments can lead to an unnecessary amount of interest being paid. For example, if an individual has a student loan at 6%, then that loan is earning 6% but for the lender not for the student. Many individuals find themselves wanting to pay off their student loans as quickly as possible. On the other hand, recent college graduates are also faced with the decision to save for retirement. Many of them have heard that it is wise to start saving when they are young in order to let compounding work its magic. However, many individuals are confused as to which situation they should take care […]
Sterling Raskie, MSFS, CFP®, ChFC®
The latest in our Owner’s Manual series, A 401(k) Owner’s Manual, was published in January 2020 and is available on 
A Medicare Owner’s Manual, is updated with 2020 facts and figures. This manual is available on 
Social Security for the Suddenly Single can be found on Amazon at 
Sterling’s first book, Lose Weight Save Money, can be 
An IRA Owner’s Manual, 2nd Edition is available for purchase on Amazon. Click the link to choose the 
Jim’s book – A Social Security Owner’s Manual, is now available on Amazon. Click this link for the 
And if you’ve come here to learn about queuing waterfowl, I apologize for the confusion. You may want to discuss your question with Lester, my loyal watchduck and self-proclaimed “advisor’s advisor”.