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Facts About Texas's 529 Plans

By    |   Tuesday, 19 May 2015 02:21 PM

With ever-skyrocketing tuition costs, the prospect of footing the bill for college is a daunting reality for many American families. The advent of state sponsored 529 plans aims to provide some relief to this huge financial stressor and in the state of Texas, more than one option is currently available.

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The Texas College Savings Plan is a 529 program available to residents of any state and is the direct-sold option, meaning that investors do not need a financial advisor to participate. This plan is sponsored by the state of Texas.

With a low opening contribution of only $25 (as of 2015), the plan makes it easy to get started saving. This plan's website also boasts low fees, but it should be noted that the current fees range from 0.6 percent to 1 percent, which is somewhat higher than other state plans, and it is also mentioned that they are subject to change.

Enrollment can be completed online or through regular mail. Like many other such college savings programs, the plan's benefits include tax-deferred growth and investor control of the money in the account. These are both big draws for most 529 plans. The Texas College Savings Plan offers two age-based investment options and eight static options. It is managed by Northstar Financial Group.

Another option in Texas is the Lonestar 529 Plan, which is also available to both state residents and nonresidents. The primary difference being that this plan is not direct-sold, but rather is advisor-sold, meaning investors cannot participate without the involvement of a professional. This plan earned a somewhat lower rating on Savingforcollege.com and an even more negative rating for those nonresidents participating in the plan.

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The Lonestar 529 Plan does not require an enrollment, application, or maintenance fee, but sales charges may apply, according to savingforcollege.com.Like the Texas College Savings plan, The Lonestar 529 is also managed by NorthStar Financial Services Group.

This particular 529 plan also makes both age-based and static portfolios available to investors. It is offered by the Texas Prepaid Higher Education Tuition Board. Minimums are similar for both Texas 529 plans. Opening minimum for the Lonestar plan is $25, and then the subsequent contribution minimum drops to $15, which is slightly less than the Texas College Savings Plan.

Basically, both plans offer tempting tax benefits and retained investor control like many other 529 plans. These plans both cover the same types of institutions including junior colleges and private institutions.  According to the website EveryChanceTexan.org, The primary difference in these options is the involvement of the financial professional or the lack thereof. Both plans allow contributions of up to $370,000 per beneficiary, according to their websites.

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With ever-skyrocketing tuition costs, the prospect of footing the bill for college is a daunting reality for many American families.
529 Plan
Tuesday, 19 May 2015 02:21 PM
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