Getting Smart About Your Educational Finances

School is back in session! Now that the school year is back in full swing, it's time to think about the financial stresses that come with it. Here is how we can get through it together.

Back to School Can Be Stressful

Sending your child back to school can be a major stressor, whether it's preparations, back-to-school shopping, or tuition. At Aurora, we firmly believe that every family should have a foolproof budget. Having a set budget can help relieve some of the stress that financial constraints cause during the back-to-school season. School uniforms and pencil grips can add up. This is why having a budget allows you to see where you are financially to efficiently plan for these expenses when they arrive.

How to Save for School Expenses

Have you started saving for K-12 education and college?  A 529 plan is a great way to start saving for these expenses. In Indiana, you get a 20% state tax credit when contributing to a 529 account up to $1,500. Staying tax-efficient is a great way to save for school expenses. 

Did you know you could also use your Indiana 529 Plan for K-12 education costs? Utilizing your 529 account for K-12 expenses as well as in college is a great way to be tax-efficient and maximize the full potential of your 529 plan.

Is it possible to overfund my Indiana 529 with a college scholarship? If you get a scholarship, you can take out that exact amount of your Indiana 529 plan without any penalty, and it will act like you used that money for college expenses. This means a scholarship won’t hurt your 529 account. How cool is that? For example, I went to Purdue University, and let’s say my stellar athletic ability landed me a $5,000 per year scholarship. Score! I can take $5,000 out of my 529 plan and not have to pay any penalties for that. This will ensure that my 529 won’t get overfunded at the end of the year because of my scholarship.

What can you use your Indiana 529 account for? In K-12 education, these expenses would be up to $10,000 in tuition if applicable. However, in college, you can be more liberal with expenses from your 529 account. Things like room and board, books, supplies, computers, and apprenticeship costs are all eligible 529 expenses. But be careful. Expenses like transportation, sports/club fees, and dorm furniture/decorations are not eligible expenses. If you used our 529 funds for these things, you would incur a penalty + tax consequences.

Did you know you could even pay off some student loans with your 529 plan? You have a lifetime limit of $10,000 per person to use 529 funds to pay off your student loans.

Any Questions? Give us a call!

Questions about your financial future? Reach out to the Aurora team about a no-obligation conversation.