EDUCATION GUIDES It’s always a good time to save for education

A tax-advantaged investment product for education that has a low impact on financial-aid eligibility

Benefits

• May be applied to K-12 tuition, vocational school, registered apprenticeships, college, graduate school and student loans
• Investments grow tax-free
• Withdrawals are not subject to federal tax (when used for qualified education expenses)
• You can “front-load” your contributions by making five years’ worth of gifts in a single year
• Easy to establish and maintain
• Beginning in 2024, a 529 plan beneficiary can roll over up to $35,000 in 529 plan funds into their own Roth IRA without paying taxes or penalties. The 529 plan must have been open for a minimum of 15 years.

Disadvantages

• You're limited to the investment options offered by the 529 plan
• Using annual exclusion gifts to fund a 529 account precludes use of the annual exclusion amount for other purposes

Schedule a meeting with your J.P. Morgan Private Client Advisor to open a 529 plan today. If you don’t have an advisor, fill out a form to set up a free one-on-one consultation.

A tax-advantaged investment product for education that has a low impact on financial-aid eligibility

Benefits

• Earnings accrue free of income tax
• Distributions may be made free of income tax as long as they're made for qualified education expenses
• Assets may be invested in almost any product, including stocks, bonds and mutual funds
• Easy to establish and maintain

Disadvantages

• Maximum investment is limited to $2,000 per year, per beneficiary. The $2,000 contribution maximum is gradually phased out if your modified adjusted gross income falls between $190,000 and $220,000 ($95,000 and $110,000 for single filers)
• Contributions must be made before the beneficiary reaches age 18

Specialized accounts that can be used for a child's general benefit, not just for education

Benefits

• The UGMA (Uniform Gift to Minors Act) and UTMA (Uniform Transfer to Minors Act) are custodial accounts that can be applied across a variety of financial needs, not just college funding
• The custodian can invest the account’s assets in any manner they choose
• Withdrawals are not subject to federal tax (when used for qualified education expenses)

Disadvantages

• Custodial accounts are considered assets of the student and must be turned over to them when they reach the age of maturity, and also may limit financial aid eligibility
• Using annual exclusion gifts to fund an UTMA account may prevent the use of the exclusion for other purposes
• These accounts are typically taxed at the same rate paid by the parents

There are a variety of financial aid packages, from scholarships to federal student loans. These options can be used to supplement your education savings.

Benefits

• Often, grants and scholarships don't have to be paid back
• Federal student loans are easy to apply for and offer flexibility when it comes to repayment
• Student loan interest can be tax-deductible

Disadvantages

• Merit-based scholarships can be very competitive and not everyone qualifies.
• Only 0.3% of students receive enough free aid to completely cover their education.
• 32% of financial aid is disbursed through federal loans that need to be paid back with interest.
• Today, a record 4 in 10 households owe student loan debt.