– 529 Essentials: 529s vs. Coverdells
– Article Round-Up
– Research: Survey Stats on the Go
– Top New Resources
– 529 Conference 2016 Update
– ABLE Act Column

Tip Jar Thoughts of the Week on College Financial Planning: Inspiration comes when and where we least expect it. This last week, I was on a family vacation in Kennebunkport, Maine. On a rare night out away from the little ones, we went out for dinner and made our way towards town for a lobster dinner with and for our California family members. While not necessarily a special night out for those living in Boston, the decor of buildings and friendliness of everyone in town reminded me of summertime. The laughter, the smell of the sea, the warmth of the sun and the dotting of souvenir shops, ice cream cones, fried food and yes, lobster. After comparing a few restaurants on Yelp and other apps, and passing on a few others in-person, we landed at the Clam Shack. Yes, this is the spot one may dream of on the coast of Maine in the middle of summer with benches, live lobster tanks and lobster traps all around. Fresh squeezed lemonade? Check. So we decided on the location and put in the order. When checking out, there was a tip jar with the following note on it reading, “Four Years of College, A Lifetime of Debt.” A stirring thought, as it was definitely a part of the scene. At first in such an idyllic scene, even I thought “yes, this all makes sense.” But then again, why? Why should this mantra be a given? At the end, I posed the question to my close Twitter community of tweeps: “Caption description anyone? Mine: 529s saves lives from student loans.” I believe all families have the ability to overcome this through active and efficient college financial planning. For example, parents and students have the opportunity to save and save efficiently over the long-term with a 529. Additionally, summer jobs before college teaches the value of money and work ethic, while working during college through work study provides money and through internships provides experience. Lastly, those that just graduated ideally will work in a field for experience and money, or at least one of the two. Also, a quick thank you to those that responded to the Twitter post with their perspective. For our 529 Dash community, we as advisors, accountants and estate planners have an opportunity to change the direction of our client’s entire life from passively accepting a lifetime of debt to a lifetime of ever rising achievements to the next level or tier of ones dreams. Have the college financial planning conversation today, and create a better reality for your clients for a lifetime.

529 Dash, Required Reading for Your 529 Education: The goal of the 529 Dash is to address the specific needs and concerns of advisers, accountants and estate planners who sell and service families and institutions in the college financial planning process by providing industry relevant news, product training and best practices. Building upon the product training and trends will be our editorial insight, market data and research. Also, the 529 Dash will provide opportunities for you to learn from and network with your peers based on real life case studies and forums such as the Strategic Insight 529 Dash LinkedIn Group. By reviewing these success stories on college financial planning from your peers of advisers, accountants and estate planners, the barriers to supporting your clients and building your book of business will be reduced.

Please Read, Engage and Share.

Paul Curley, CFA
Editor-in-Chief of 529 Dash
Director of College Savings Research
pcurley@sionline.com
Twitter: @PaulCurleyBC
LinkedIn: Strategic Insight 529 Dash LinkedIn Group

This week, we will compare and contrast 529s and Coverdell Education Savings Accounts.

Two Basic Types of Investment Vehicles Designed for Post-Secondary Expenses: 529 plans and Coverdell Education Savings Accounts. Both investment types allow families to save money for education with tax exempt asset growth and tax-exempt distributions if used for qualified expenses. Additionally, distributions from 529s and Coverdells are considered an asset of the parent in terms of financial aid, which provides them with beneficial FAFSA treatment in comparison to assets saved in taxable accounts. While 529s are offered by states, Coverdells are offered by banks, brokerage firms, product providers and any other IRS-approved entity that decides to offer them. Despite more firms being allowed to offer Coverdells, several firms have stopped offering them due to their comparative limitations. Alternatively, more 529s are being offered by an increasing number of providers. Despite the trend in usage, Coverdells still have their place in financial planning. For example, the money saved in a Coverdell can be used for elementary, secondary and postsecondary levels of education while 529s can only be used for postsecondary levels of education such as college or graduate school. Therefore you as an advisor can provide value by knowing these differences and selecting the right plan based on the unique needs of your client.

Click Here to Learn More.

Here is what you need to know from stories released this week. 

– CommonBond Press Release, “CommonBond Raises Over $300 Million and Acquires Student Loan Company.” Editor’s Take: As college financial planning employee benefits continue to become more prevalent, valuation of platforms built to ease the employer burden of student loan payments continues to rise.
– PLANADVISER, “Participants Should Not Pay Off Student Loan Debt Early.” Editor’s Take: Hypothetically, student loaners don’t default and file for bankruptcy. In reality, 11.8% of student loaners are in default as of September 2015, and student loans are nearly impossible to dismiss in bankruptcy court. In terms of raw numbers per the Department of Education, 610,956 out of the 5,143,918 student loaners are in default. Additionally if parents co-signed the student loans, they too are not able to dismiss the student loans in court if their child is unable to pay for any reason including death, as a recent case in New Jersey showed. Theories help some families take the first step, but taking into account the realities as well will ensure that it’s not their last step towards solid financial security. Open a 529 plan to save and pay for college efficiently in terms of tax, financial aid and estate planning, and prioritize paying off student loans to achieve financial freedom faster as student loans are rarely subject to dismissal when in default or bankruptcy court.
– Janus, “5 Ways to Navigate the New Financial Aid Rules.” Editor’s Takes: Learn about custodial 529 accounts, and the beneficial treatment of 529s on financial aid and on annual tax planning.
– Winnie Sun, Managing Director of Sun Group Wealth Partners, “Before You Take On Financial Aid, Read This.” Editor’s Take: Tips on late stage college financial planning.

Here is what you need to know from data and research released this week.

– 39% of college students achieve their undergraduate degree in four years or less. Editor’s Take: Parents may have saved up enough to pay for four years of college per child, but even that may not be enough given the low percentage graduating in four years.
– 20% of student loaners in 2016 enrolled in affordable payment plans, compared to 5% in 2012. Editor’s Take: College financial planning has historically focused on efficiently saving and paying for college, but the focus is rotating some of its focus to include repaying college expenses as well.
– 0.4% increase in real median household income was reported in June 2016.” Editor’s Take: Stagnant real median income levels is not filling the college affordability gap. Therefore parents need to create and implement an efficient college financial plan driven by saving and saving efficiently with 529s to fill the college affordability gap.

This section spotlights the top new resources released this last week. This week we highlight the following new tools and white papers:

– FINRA, “U.S. Survey Data at a Glance.” Editor’s Take: The results provide a number of proof points that show the need for better financial planning on a state-by-state basis and cumulative national level. For example, 54% of Americans do not have a rainy day fund, and this data point can be compared to the state response level as well.
– WealthManagement.com, “The 50 most common family types in America.” Editor’s Take: Understanding the most common family types will help you create and think through scenarios when presenting college financial planning examples to clients. Click to learn more.

The 529 Conference 2016 will take place from September 12-14, 2016 at the JW Marriott Grande Lakes in Orlando. Updates to the agenda will be announced in this section. Register today.

This section will cover this week’s top legislative updates, product developments, news and resources relating to 529A ABLE Accounts. ABLE Accounts are tax-advantaged savings accounts for individuals with disabilities and their families. Income earned by the accounts will not be taxed when used for qualified expenses. For training on the product’s fundamentals and an update on the product’s trends, register for the upcoming ABLE Afternoon Summit on September 14, 2016.

ABLE Afternoon Summit Agenda Update:
– Kathleen F. McGrath, Esq., Bureau Director, PA 529 College Savings Program, Pennsylvania Treasury Department, to present on “ABLE Implementation: Product Design” panel.

List of Open ABLE Programs:
– Ohio STABLE Program
– ABLE TN
– Nebraska Enable Savings Program
– Florida ABLE United Program

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