You’re thinking to yourself: I want to save for college, but is there really a benefit to a 529 college savings plan?  Here are common college savings plan myths we hear from parents.

Wait – what is a 529 college savings plan, again? It is a state-sponsored way to save for college! NEST 529 is the name of Nebraska’s plan. You can learn even more details on this blog. (P.S. 529 refers to Section 529 of the Internal Revenue Code.)

  1. If my child doesn’t go to college, we lose all the money.

Not true! As the account owner, you have the flexibility to change the name of the beneficiary, or who the funds go to. You could change the name to a sibling, niece or nephew, future grandchild, or even yourself!

If you really want to withdraw the funds for something else (called non-qualified withdrawals), the earnings portion will be subject to tax (including 10% federal) and penalties.

  1. We have to use the funds in our home state.

Not true! These dollars can be used at most colleges and universities in the US, and even around the world.

  1. My child will get scholarships to fully fund their college, so I don’t need to save.

A 2018-19 national survey showed parents covered 30% – or about $7,800 – of college costs with their own savings and income. Scholarships and grants covered, on average, 31% of student costs.

If you’re thinking your child needs to take a little more responsibility in paying their own way, know that most do! Students covered 27% of costs from their own income, savings, and borrowing. But it’s important to know that students have limits.

Currently, dependent college freshmen can only borrow up to $5,500 in direct student loans, at a 4.5% interest rate. If that’s not enough to cover the cost of college, parents can borrow the cost of education at a 7% interest rate.

  1. My child won’t get financial aid if we have a 529.

The 529 plan funds are currently reported as a parent asset on the FAFSA. But income typically has a greater impact when determining financial aid your student will receive.

If someone else (like a grandparent) owns the account, the value of the account will not be listed as an asset on the FAFSA. But when the student receives funds from the account, this amount should be reported on the FAFSA. This could impact the expected family contribution.

  1. I don’t have enough money to save for college – especially in a 529.

The beauty of a NEST 529 plan is no minimum contribution amount! When we opened our account for our son as in infant, we still had the looming hospital bill from his birth, and monthly daycare costs ahead of us. We started with only $25 a month. Maybe you can only make $5 a month work. The most important thing to remember: parents with a plan for paying for college have more than double the college savings than those without a plan.

  1. It’s too late to start a 529 – my child is too old.

While you may not benefit from the power of compounding interest over time, you could still reap the rewards of a tax benefit. If you are writing a check for a tuition bill, why not send that money through a 529 account, and get the tax advantage? (P.S. Nebraska account owners can deduct contributions made to their NEST account up to $10,000 per year; $5,000 if married filing separately).

Also, it feels a bit silly to say this, but: everyone’s doing it. Most college savings are currently in 529 plans. This is a tried and trusted way families are preparing to pay for higher education. And in Nebraska, it is sponsored by your state treasurer’s office.

As a NEST 529 user myself, I would strongly encourage you to check out the plan (here are the 5 steps you need to take to open an account). More importantly, why I have one for my son instead of stowing away cash in a savings account at my bank: because I won’t touch it ‘til he is ready for it. And I have a monthly deposit set up from my bank to the plan, so I don’t have to think about contributing to it. It is simple – and has eased some anxiety about me paying for his college in the future.

Don’t let the myths of saving deter you! Start saving in a 529 now!