PA 529 Plan – Making the Best College Saving Plan Decision

For Pennsylvania residence the month of August is an important one if you are saving for your children’s education.  The reason for the importance is that the PA 529 GSP plan changes credit value on September 1 of each year.  This 529 plan is called the PA 529 Guarantee Saving Plan (GSP) and years ago it was called the PA TAP program.  It is very different than the PA 529 investment plan, managed by Vanguard.  For some people, states with multiple 529 plans can be confusing and is one of the problems why people do not use them.

People need to realize that not all 529 saving plans are equal.  What is in them and how to use them is most important.  The PA 529 GSP plan is structured to keep pace with tuition increases at various types of colleges.  The state treasury office establishes these credit values and adjusts them once a year by school classification. 

In addition, PA residences get an income tax deduction for any 529 contributions; this can be a great option for paying for college.  Contributions are limited to the gift tax amount per child per parent if they have taxable Pennsylvania income.

The only slight disadvantage is that the money needs to be in the plan for a year before it can be used for qualified educational expenses.

Listed below are a few common misunderstanding about the PA 529 GSP plan that I hear:

  • I can only use the money for Pennsylvania Schools – Not True

  • I can only use a 529 before college starts – Not True

  • Money in a child’s 529 plan will hurt me more for financial aid – Not True

Proper use of the right 529 plan can save parents a significant amount of money when paying for college.  Funding a college education can be one of the most expensive costs of raising a child.  Please visit our College Affordability website for more information on the entire college financial aid process.

As a disclosure item, we are not recommending any specific 529 plans.  Each person situation is unique.  You need to consult with a financial advisor to address your specific needs and situation.

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