Nov. 11 is Veterans Day when we honor all U.S. military veterans. This year also marks the 100th anniversary of the end of World War I.
Currently, there are over 20 million military veterans in the United States and nearly two million men and women actively serving in our active duty, National Guard, and reserve armed forces. Each one took an oath to “support and defend the Constitution of the United States against all enemies foreign and domestic.” Among the freedoms that this oath and this commitment to service protects is the freedom to choose a path of education, training, or certification that ensures a rewarding career and economic prosperity.
U.S. Department of Veterans Affairs administers the Post-9/11 GI Bill. This federal assistance includes 36 months of education benefits: full in-state public school tuition and fees (there is a national maximum rate cap for tuition and fees for attending a private college), monthly housing allowance, and an annual books and supplies stipend.
If you choose not to use these benefits for your own continuing education, you can transfer their unused GI bill benefits to your dependents — spouses and children. The education benefits can also be divided among the dependents, to pay for their college or vocational training.
529 plans work with GI Bill benefits
What are 529 plans? These specialized accounts are a tax-advantaged way to save for college with tax-free earnings and tax-free withdrawals. Some states offer state income tax deductions or credits for 529 contributions. With Ohio’s 529 Plan, CollegeAdvantage, Ohio residents can currently deduct 529 contributions up to $4,000 per beneficiary, per year from their state income tax. However, with unlimited carry forward Ohioans can continue to deduct a large 529 plan contribution from their state income tax until all of it has been deducted.
A 529 plan can supplement these service-earned education benefits. If you split your Post-9/11 GI Bill benefits among multiple dependents, then a 529 plan can help cover the remaining qualified higher education expenses associated with attending a two-year or four-year college, trade or vocational school. Eligible expenses range from tuition; mandatory fees; computer equipment and related technology and services; books; supplies, and equipment required for enrollment or attendance; room and board costs or off campus housing during any academic period the beneficiary is enrolled at least half-time; and certain expenses for a special-needs student. Room and board costs can also include rent for off-campus residency and groceries (non-taxable items), provided these costs are equal or less than the same room and board allowances from the accredited education institution
Military academy attendance and 529 plans
What if you’ve been saving for college in a 529 plan and your child is selected to attend an U.S. military academy? You still have access to the college savings funds. While considered a non-qualified withdrawal, the parents can ask for a 529 plan disbursement up to the estimated cost of attending the military academy without incurring a 10% federal tax penalty. The earnings portion only of the withdrawal will be subject to federal, state, and local taxes.
Why save in Ohio’s 529 Plan?
If you read financial websites, you will discover the industry's high regard for Ohio’s 529 Plan. Financial industry organizations like Morningstar, Saving For College, CNBC, and Forbes have all rated Ohio’s 529 Plan as one of the best college savings programs in the nation. Here’s what they had to say.
Trusted financial industry investment research company Morningstar annually reviews the nation’s 529 college savings programs. Morningstar then ranks the 529 plans in a report released in November 2022.
Ohio’s 529 Plan is pleased to announce that the CollegeAdvantage Direct 529 Plan maintained its silver rating for the tenth year in a row. In addition, BlackRock CollegeAdvantage, Ohio’s Advisor 529 Plan retained its bronze ranking. This makes Ohio one of only three states that have both their Direct and Advisor 529 Plans ranked as medal-class college savings programs. The high ranking highlights the strength of and the industry’s regard for Ohio’s 529 Plan as one of the best in the nation.
Saving For College is an independent college-savings industry resource. Saving For College consistently recognizes Ohio’s Direct 529 Plan as one of the best plans in the nation for both Ohio residents and non-Ohio residents.
Ohio’s Direct 529 Plan is one of three plans in the nation to receive positive ratings from Morningstar in all four ranking pillars as well as earn the five-cap rating from Saving For College for residents and non-residents. Ohio’s Advisor BlackRock CollegeAdvantage 529 Plan is one of two plans to receive positive rankings in three Morningstar ranking pillars and earn five-cap rating from Saving For College for residents and four-and-a-half-star rating for non-residents.
A 5-Cap designation is dependent on criteria that shows the college savings plan “offers outstanding flexibility, attractive investment, and additional economic benefits (such as generous state tax incentives) that for some people, at least, will provide a substantial boost to their savings. There are few, if any, weaknesses noted in the program.”
Ohio’s Direct 529 Plan is one of ten 529 college savings plans nationwide to earn a 5-Cap rating for both residents and non-residents, as of March 31, 2022. Ohio’s Direct 529 Saving Plan has received this recognition multiple times for the plan’s attractiveness for Ohioans and across the nation.
Ohio’s 529 Plan was recently named one of Military Saves Savings Champion for our continual support of this important program. Military Saves is part of the nonprofit Consumer Federation of America and is an initiative of America Saves. Military Saves works with government agencies, defense credit unions, military banks, and nonprofit organizations to promote savings and debt reduction.
Forbes Advisor ranks Ohio’s 529 Plan as one of the six best college savings programs in the nation. According to their explanation: “Ohio’s 529 Plan comes with features in line with the other plans on our list, including low fees, a range of investment options and a tax deduction for Ohio taxpayers. … The plan also comes with a minimum contribution, both to open the account and for each contribution thereafter. But it is small ($25) and likely manageable for many plan participants.”
CNBC also selected Ohio’s 529 Plan as one of the five best programs nationwide. As they wrote, “There isn’t much not to like about the CollegeAdvantage 529 plan — there’s a good mix of investment options (including FDIC-insured accounts), low fees and plans from top companies like Dimensional Fund Advisors. In fact, overall management fees are some of the lowest we’ve seen. Combined with low expense ratios, this makes this plan one of our top picks.”
Money Inc. ranks Ohio’s 529 Plan, CollegeAdvantage, second in its list of the top ten 529 programs nationwide. They highlighted the “tax break for Ohio residents, a diverse selection of investment alternatives, and low fees.”
On this Veterans Day, let us take pause and express our gratitude to all those who have served and are serving our great nation, for the many blessings of freedom we enjoy would not be possible without their willingness to answer the call to service.