Kim Finkle, MBA, Financial Advisor

How Does The CollegeCounts 529 Plan Work? 

The CollegeCounts works like a mutual fund. It is managed by Union Bank and its investment advisor, Wilshire Funds Management. The plan invests in stock market funds. The investments are selected based on the student's time horizon. A parent can start the plan for as little as $25 and contribute until the beneficiary is 18 years old. The contribution limit for a married couple is $150,000 per year and for divorced or separated parents is $75,000 each. The plan requires all distributions to be completed by the age of 30. The best feature of the CollegeCounts plan is that the student can attend college anywhere in the USA.

 

CollegeCounts also offers a scholarship. In 2021, 29 scholarships were opened for new born babies. Alabama State Treasurer, John McMillan has endorsed the the scholarship offered by the plan.

 

5/29 Day was this weekend and to commemorate CollegeCounts is giving 29 babies born between 5/29/20 and 5/29/21 $529 in a college savings plan! Enter your baby at https://t.co/nMuHpQDQbp pic.twitter.com/EorTwzViBW

— Alabama State Treasurer John McMillan (@alatreasurer) June 1, 2021

 

Enrollment Requirement  

There are no income or residency requirements.

 

Educational Programs Funded By CollegeCounts

• Apprenticeship - More and more students are opting for apprenticeships over a four-year college degree. The plan allows a student to pay books, equipment, fees, and supplies for on-the-job training with classroom instruction. The apprenticeship program must be registered with the U.S. Department of Labor.
• Vocational School - Trade schools are popular once again. The plan can be used to pay for a vocational school with a Federal School Code. A future tradesman/woman can pay for all qualified expenses including tuition, fees, housing, meal plans, books, supplies, computer technology, and equipment.
• Graduate and Undergraduate College - The plan can pay for qualified expenses including tuition, fees, housing, meal plans, books, supplies, computer technology, and equipment at any college or university in the U.S. as well as some international schools. 
• Continuing Education - The reality today is that to stay competitive in the job market we have to continue upgrading our skills. That may require us to go back to school to pursue a continuing education program or a degree program. The plan can pay for tuition, fees, housing, meal plans, books, supplies, computer technology, and equipment at a qualified institution. 

 

Benefits of CollegeCount

• Tax-Deferred - All earnings on the plan are tax-deferred. The qualified distributions are also exempt from federal taxes if residency requirements are met. In addition that a couple can deduct up to $10,000 per year tax-free and a divorced or separated parent can deduct up to $5,000 tax-free.
• Can be funded by Rolling Over  - The plan can be funded by rolling over another college savings plan.
• Anyone can contribute - Anyone whether related by blood or not can contribute up to $15,000 per year to your plan. It includes parents, grandparents, guardians, aunts, uncles, and cousins.  
• Supports in-state and out-of-state schools - You can use your savings for schools that are inside Alabama or in other states.
• VISA Cashback - The plan holders are eligible to get the CollegeCounts 529 Rewards Visa® Card. Cardholders can earn 1.529% in rewards that are directly applied to the CollegeCounts 529 College Savings Plan.

 

How to Enroll 

• You can enroll by going to the CollegeCounts website.

 

Criticism for CollegeCounts

• Since the plan mainly invests in the stock market, the plan beneficiary may not have enough funds due to the market fluctuations.   
• Some distributions may be taxable.
• It gives an unfair advantage to the rich since a couple can invest up to $150,000 per beneficiary. 
• It limits the age to 30 for getting a college education.

 

Co-parents and Alabama College Savings Plan

The CollegeCounts 529 plan can be a good option for divorced and separated parents residing in different states. It allows them to save up to $415,000 for their children.

Since co-parents have separate finances and only one person can start a CollegeCount plan, both parents can start one separately for the same child, and fund half of the balance.  This way, if the child decides not to attend college or they need to withdraw funds for some other reason, or assign a different beneficiary for their portion, they can do so easily.  Alternately, one parent can fund the entire plan and the other one can reimburse them for their half.  Another option is that they can start 529 plans in different states and fund half each.

 

Comparison With Other 529 Plans

Feature	Alabama	California	Alaska
Max Contribution	N/A	$529,000	$415,000
Full In-state Tuition	Yes	Yes	Yes
Full Out-of-state Tuition	Yes	Yes	Yes
State Tax Exemption	No	Yes	Yes
Federal Tax Exemption	Yes	Yes	Yes
Primary Contributors	Anyone	Anyone	Anyone
Student Loan Repayment Option	Yes	Yes	Yes
Plan Review		Link	Link

 

Related:

What is a 529 College Savings Plan?

 

529 Plans By State

1. Alaska 529 Plan

2. Alabama 529 Plan

3. Arizona 529 Plan

4. Arkansas 529 Plan

5. California 529 Plan

6. Colorado 529 Plan

7. Connecticut 529 Plan

8. Delaware 529 Plan

9. Florida 529 Plan

10. Georgia 529 Plan

11. Hawaii 529 Plan

12. Idaho 529 Plan

13. Illinois 529 Plan

14. Indiana 529 Plan

15. Iowa 529 Plan

16. Kansas 529 Plan

17. Kentucky 529 Plan

18. Louisiana 529 Plan

19. Maine 529 Plan

20. Maryland 529 Plan

21. Massachusetts 529 Plan

22. Michigan 529 Plan

23. Minnesota 529 Plan

24. Mississippi 529 Plan

25. Missouri 529 Plan

26. Montana 529 Plan

27. Nebraska 529 Plan

28. Nevada 529 Plan

29. New Hampshire 529 Plan

30. New Jersey 529 Plan

31. New Mexico 529 Plan

32. New York 529 Plan

33. North Carolina 529 Plan

34. North Dakota 529 Plan

35. Ohio 529 Plan

36. Oklahoma 529 Plan

37. Oregon 529 Plan

38. Pennsylvania 529 Plan

39. Rhode Island 529 Plan

40. South Carolina 529 Plan

41. South Dakota 529 Plan

42. Tennessee 529 Plan

43. Texas 529 Plan

44. Utah 529 Plan

45. Vermont 529 Plan

46. Virginia 529 Plan

47. Washington 529 Plan

48. West Virginia 529 Plan

49. Wisconsin 529 Plan

50. Wyoming 529 Plan

51. DC 529 Plan

Warning:  This post is neither financial, health, legal, or personal advice nor a substitute for the advice offered by a professional. These are serious matters, and the help of a professional is recommended as it can impact your future.